SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (NO 2-21461)
UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. 39 [x]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. ____ [ ]
Fidelity Magellan Fund
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, MA 02109
(Address Of Principal Executive Offices) (Zip Code)
(617) 570-7000
(Registrant's Telephone Number)
Arthur S. Loring
82 Devonshire Street,
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) Immediately upon filing pursuant to paragraph (b) of Rule 485
( ) On ( ) pursuant to paragraph (b) of Rule 485
( ) 60 days after filing pursuant to paragraph (a) of Rule 485
( X ) On ( May 20, 1994 ) pursuant to paragraph (a) of Rule 485
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 and intends to file the notice required by
such Rule before May 31, 1994.
FIDELITY MAGELLAN FUND
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C>
1................................... Cover Page
...
2a.................................. Expenses
..
b, Contents; The Fund at a Glance; Who May Want to
c................................ Invest
3a.................................. Financial Highlights
..
*
b...................................
.
Performance
c....................................
4a Charter
i.................................
The Fund at a Glance; Investment Principles and
ii............................... Risks
b................................... Investment Princliples and Risks
..
Who May Want to Invest; Investment Principles and
c.................................... Risks
5a.................................. Charter
..
b(i)................................ Doing Business with Fidelity; Charter
Charter
(ii)..............................
(iii)........................... Expenses; Breakdown of Expenses
c, Charter; Investment Principles and Risks;
d................................ Breakdown of Expenses, Cover page
Investment Principles and Risks
e....................................
Expenses
f....................................
g(i)................................ Investment Principles and Risks
..
(ii)................................. *
..
5A................................. Performance
.
6a Charter
i.................................
How to Buy Shares; How to Sell Shares; Transaction
ii................................ Details; Exchange Restrictions
*
iii...............................
*
b...................................
.
Exchange Restrictions
c....................................
*
d...................................
.
Doing Business with Fidelity; How to Buy Shares;
e.................................... How to Sell Shares; Investor Services
f,g................................. Dividends, Capital Gains, and Taxes
..
7a.................................. Cover Page; Charter
..
How to Buy Shares; Transaction Details
b...................................
.
Sales Charge Reductions and Waivers
c....................................
How to Buy Shares
d...................................
.
e.................................... *
f ................................ *
8................................... How to Sell Shares; Investor Services; Transaction
... Details; Exchange Restrictions
9................................... *
...
</TABLE>
* Not Applicable
FIDELITY MAGELLAN FUND
CROSS REFERENCE SHEET
(continued)
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C>
10, 11.......................... Cover Page
12.................................. *
..
13a - Investment Policies and Limitations
c............................
*
d..................................
14a - Trustees and Officers
c............................
15a, *
b..............................
Trustees and Officers
c..................................
16a FMR
i................................
Trustees and Officers
ii..............................
Management Contract
iii.............................
Management Contract
b.................................
c, Contracts with Companies Affiliated with FMR
d.............................
e - *
g...........................
Description of the Fund
h.................................
Contracts with Companies Affiliated with FMR
i.................................
17a - Portfolio Transactions
c............................
*
d,e..............................
18a................................ Description of the Fund
..
*
b.................................
19a................................ Additional Purchase and Redemption Information
..
Additional Purchase and Redemption Information;
b.................................. Valuation of Portfolio Securities
*
c..................................
20.................................. Distributions and Taxes
..
21a, Contracts with Companies Affiliated with FMR
b..............................
*
c.................................
22.................................. Performance
..
23.................................. Financial Statements
..
</TABLE>
* Not Applicable
FIDELITY
MAGELLAN
(Registered trademark)
FUND
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how the fund
invests and the services available to shareholders.
A Statement of Additional Information dated May 20, 199 4 has been
filed with the Securities and Exchange Commission, and is incorporated
herein by reference
(is legally considered a part of this prospectus). The Statement of
Additional Information is available free upon request by calling Fidelity
at 1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or endorsed or
guaranteed by, any bank, savings association, insured depositary
institution, or government agency, nor are they federally insured or
otherwise protected by the FDIC, the Federal Reserve Board, or any other
agency. Investments in the fund involve investment risk, including
possible loss of principal. The value of the investment and its return
will fluctuate and are not guaranteed. When sold, the value of the
investment may be higher or lower than the amount originally invested.
Magellan i s a growth fund. It seeks to increase the value of your
investment over the long term by investing in securities with growth
potential.
PROSPECTUS
MAY 20, 1994
LIKE ALL MUTUAL
FUNDS, THESE
SECURITIES HAVE NOT
BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION, NOR HAS
THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY
OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
MAG-pro-594
(Registered trademark)
82 Devonshire Street, Boston, MA 02109
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
KEY FACTS 3 THE FUND AT A GLANCE
3 WHO MAY WANT TO INVEST
4 EXPENSES The fund's sales
charge (load) and its yearly
operating expenses.
5 FINANCIAL HIGHLIGHTS A summary
of the fund's financial data.
6 PERFORMANCE How the fund has
done over time.
THE FUND IN DETAIL 8 CHARTER How the fund is
organized.
9 INVESTMENT PRINCIPLES AND RISKS
The fund's overall approach to
investing.
13 BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.
YOUR ACCOUNT 15 DOING BUSINESS WITH FIDELITY
15 TYPES OF ACCOUNTS Different
ways to set up your account,
including tax-sheltered retirement
plans.
17 HOW TO BUY SHARES Opening an
account and making additional
investments.
19 HOW TO SELL SHARES Taking money
out and closing your account.
21 INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND
23 DIVIDENDS, CAPITAL GAINS, AND
ACCOUNT POLICIES TAXES
24 TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
27 EXCHANGE RESTRICTIONS
28 SALES CHARGE REDUCTIONS AND
WAIVERS
</TABLE>
<r>KEY FACTS</r>
THE FUND AT A GLANCE
GOAL: capital appreciation (increase in the value of the fund's shares). As
with any mutual fund, there is no assurance that the fund will achieve its
goal.
STRATEGY: Invests mainly in common stock and securities convertible
into common stock of domestic , foreign and multinational
issuers of all sizes that offer potential for growth.
MANAGEMENT: Fidelity Management & Research Company (FMR) chooses
investments for the fund. FMR is the management arm of Fidelity
Investments, which was established in 1946 and is now America's largest
mutual fund manager. Foreign affiliates of FMR help choose investments
for the fund.
SIZE: As of March 31, 199 4 , the fund had over $ __ billion in
assets.
WHO MAY WANT TO INVEST
The fund may be appropriate for investors who are willing to ride
out stock market fluctuations in pursuit of potentially high long-term
returns. The fund invests for growth; it does not invest for income, and is
not in itself a balanced investment plan.
Over time, stocks have shown greater growth potential than other types of
securities. In the short term, however, stock prices can fluctuate
dramatically in response to company, market, or economic news. When you
sell your fund shares, they may be worth more or less than what you paid
for them.
THE SPECTRUM OF
FIDELITY FUNDS
(checkmark)
Broad categories of Fidelity funds are presented here in order of
ascending risk. Generally, investors seeking to maximize return must
assume greater risk. Magellan is in the GROWTH category.
(bullet) MONEY MARKET Seeks income and stability by investing in
high-quality, short- term investments.
(bullet) INCOME Seeks income from investments in bonds.
(bullet) GROWTH AND INCOME Seeks long-term growth and income by
investing in stocks and bonds.
(arrow) GROWTH Seeks long-term growth by investing mainly in stocks.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell
shares of a fund. See pages 10 and 16-22 for an explanation of how and when
these charges apply. Lower sales charges may be available for accounts
over $250,000.
Maximum sales charge on purchases
(as a % of offering price) 3.00%
Maximum sales charge on
reinvested dividends None
Deferred sales charge on redemptions None
Exchange fee None
ANNUAL FUND OPERATING EXPENSES are paid out of the fund's assets. The fund
pays a management fee that var ies based on its
performance. It also incurs other expenses for services such as maintaining
shareholder records and furnishing shareholder statements and fund reports.
The fund's expenses are factored into its share price or dividends and are
not charged directly to shareholder accounts (see page 24).
The following are projections based on historical expenses, and are
calculated as a percentage of average net assets.
Management fee .___ %
12b-1 fee None
Other expenses . ___ %
Total fund operating expenses ____ %
EXAMPLE: Let's say, hypothetically, that the fund's annual return is 5% and
that its operating expenses are exactly as just described. For every $1,000
you invested, here's how much you would pay in total expenses if you
close your account after the number of years indicated:
After 1 year $ ___
After 3 years $ ___
After 5 years $ ___
After 10 years $ ___
Th ese example s illustrate the effect of expenses, but
are not meant to suggest actual or expected costs or returns, all of
which may vary.
UNDERSTANDING
EXPENSES
(checkmark)
Operating a mutual fund involves a variety of expenses for portfolio
management, shareholder statements, tax reporting, and other services. As
an investor, you pay some of these costs directly (for example, the fund's
3% sales charge). Others are paid from the fund's assets; the effect of
these other expenses is already factored into any quoted share price or
return.
FINANCIAL HIGHLIGHTS
Th e table that follows has been audited by _______________ ,
independent accountants. Their unqualified report is included in the
fund's Annual Report. The Annual Report is incorporated by reference into
(is legally a part of) the Statement of Additional Information.
Financial Highlights to be filed by subsequent amendment.
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN. The total
returns that follow a re based on historical fund results and do not
reflect the effect of taxes.
The fund's fiscal year runs from April 1 through March 31. The tables below
show the fund's performance over past fiscal years compared to two
measures: investing in a broad selection of stocks (S&P 500), and not
investing at all (inflation, or CPI). To help you compare this fund to
other funds, the chart on page __ displays calendar-year
performance.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Past 10
March 31, 199 4 year years years
Magellan % % %
Magellan (load adj.*) % % %
S&P 500(Registered trademark) % % %
Consumer Price Index % % %
CUMULATIVE TOTAL RETURNS
Fiscal Periods ended Past 1 Past 5 Past 10
March 31, 199 4 year years years
Magellan % % %
Magellan (load adj.*) % % %
S&P 500(Registered trademark) % % %
Consumer Price Index % % %
* LOAD-ADJUSTED RETURNS INCLUDE THE EFFECT OF PAYING THE FUND'S 3% SALES
CHARGE.
EXAMPLE: Let's say, hypothetically, that an investor put $10,000 in the
fund on March 31, 198 4 . From that date through March 31,
199 4 , the fund's total return, including the effect of paying the 3%
sales charge, was _____ %. That $10,000 would have grown to
$ ____ (the initial investment plus ____ % of $10,000).
$10,000 OVER 10 YEARS
Fiscal y ears 198 4 1988 199 4
$60,000
$50,000
- -
$40,000
- -
$30,000
- -
$20,000
- -
$10,000
- -
0
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UNDERSTANDING
PERFORMANCE
(checkmark)
Because this fund invests in stocks, its performance is related to that of
the overall stock market. Historically, stock market performance has been
characterized by volatility in the short run and growth in the long run.
You can see these two characteristics reflected in the fund's performance;
the year-by-year total returns on page 7 show that short-term
returns can vary widely, while the returns at left show long-term growth.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in the fund over a
given period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
YEAR-BY-YEAR TOTAL RETURNS
Calendar years 1984 198 5 198 6 198 7 198 8
198 9 19 90 19 91 199 2 199 3
Magellan Fund % % % % %
% - % % %
Competitive funds average - % % % %
% % - % % %
60%
40%
20%
0%
Magellan Fund
(not load adj.)
Competitive
funds average
THE S&P 500(Registered trademark) is the Standard & Poor's 500
Composite Stock Price Index, a widely recognized, unmanaged index of common
stock prices. The S&P 500 figures assume reinvestment of all dividends
paid by stocks included in the index. They do not, however, include any
allowance for the brokerage commissions or other fees you would pay if you
actually invested in those stocks.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. government.
THE COMPETITIVE FUNDS AVERAGE is the Lipper Growth Funds Average, which
currently reflects the performance of over ___ mutual funds with similar
objectives. This average, which assumes reinvestment of distributions, is
published by Lipper Analytical Services, Inc.
Other illustrations of fund performance may show moving averages over
specified periods.
The fund's recent strategies, performance, and holdings are detailed
twice a year in f inancial reports, which are sent to all
shareholders. For current performance or a free annual report, call
1-800-544-8888.
TOTAL RETURNS ARE BASED ON PAST RESULTS AND ARE NOT AN INDICATION OF FUTURE
PERFORMANCE.
THE FUND IN DETAIL
CHARTER
MAGELLAN FUND IS A MUTUAL FUND: an investment that pools shareholders'
money and invests it toward a specified goal. In technical terms, the fund
is an open-end, diversified management investment company. It was organized
as a Massachusetts corporation on December 18, 1962, and was reorganized as
a Massachusetts business trust on October 1, 1984.
THE FUND IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the fund's activities,
review contractual arrangements with companies that provide services to the
fund, and review performance. The majority of trustees are not otherwise
affiliated with Fidelity.
THE FUND MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These meetings
may be called to elect or remove trustees, change fundamental policies,
approve a management contract, or for other purposes. Shareholders not
attending these meetings are encouraged to vote by proxy. Fidelity will
mail proxy materials in advance, including a voting card and information
about the proposals to be voted on. The number of votes you are
entitled to is based upon the dollar value of your investment.
FMR AND ITS AFFILIATES
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs. Fidelity Management & Research (U.K.)
Inc. (FMR U.K.) and Fidelity Management & Research (Far East) Inc. (FMR
Far East) assist FMR with foreign investments.
Jeff Vinik is manager and vice president of Magellan, which he has
managed since July 1992. Previously, he managed Growth & Income,
Contrafund and Select Energy Service. Mr. Vinik joined Fidelity in
1986.
FDC distributes and markets Fidelity's funds and services. Fidelity Service
Co. (FSC) performs transfer agent servicing functions for the fund.
FMR Corp. is the parent company of these organizations. Through ownership
of voting common stock, Edward C. Johnson 3d (President and a trustee of
the trust ), Johnson family members, and various trusts for the
benefit of the Johnson family form a controlling group with respect to FMR
Corp.
A broker-dealer may use a portion of the commissions paid by the fund to
reduce the fund's custodian or transfer agent fees. FMR may use its
broker-dealer affiliates and other firms that sell fund shares to carry
out the fund's transactions, provided that the fund receives
brokerage services and commission rates c omparable to those of
other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
THE FUND SEEKS CAPITAL APPRECIATION through investments in securities of
domestic , foreign , and multinational issuer s. The fund
normally invests primarily in common stocks and securities convertible into
common stock. The fund may invest a portion of its assets in debt
securities of all types, qualities, and maturities issued by domestic and
foreign issuers, if FMR believes that doing so will result in capital
appreciation. Historically, common stocks have shown greater long-term
growth potential than other types of securities. However, stock values
fluctuate in response to the activities of individual companies and general
market and economic conditions.
In selecting DOMESTIC SECURITIES for the fund, FMR may examine U.S.-based
corporations of all sizes, industries, and geographical markets. In
selecting FOREIGN SECURITIES, FMR will favor companies that are large and
well-known, although it may choose smaller firms that it believes offer
unusual value, even if they involve more risk.
The fund may buy securities, including domestic and foreign debt
securities, that pay dividends. However, no emphasis is placed on dividend
income, except when FMR believes this income will have a favorable
influence on the market value of the security.
THE FUND WILL SPREAD INVESTMENT RISK by limiting its holdings in any one
company or industry. FMR may use various investment techniques to
hedge the fund's risks, but there is no guarantee that these strategies
will work as FMR intends . When you sell your shares, they may be
worth more or less than what you paid for them.
FMR normally invests the fund's assets according to its investment
strategy. When FMR considers it appropriate for defensive purposes ,
however, it may temporarily invest substantially in investment-grade debt
securities.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which the fund may invest, and strategies FMR may employ in
pursuit of the fund's investment objective. A summary of risks and
restrictions associated with these instrument types and investment
practices is included as well. Policies and limitations are considered at
the time of purchase; the sale of instruments is not required in the event
of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help the
fund achieve its goal. As a shareholder, you will receive f inancial
reports every six months detailing the fund holdings and describing recent
investment activities.
EQUITY SECURITIES may include common stocks, preferred stocks, convertible
securities, and warrants. Common stocks, the most familiar type, represent
an equity (ownership) interest in a corporation. This ownership interest
often gives the fund the right to vote on measures affecting the company's
organization and operations. Although common stocks have a history of
long-term growth in value, their prices tend to fluctuate in the short
term , particularly those of smaller companies.
RESTRICTIONS: The fund may not own more than 10% of the outstanding voting
securities of a single issuer.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities , such as zero coupon bonds , do not pay
current interest, but are purchased at a discount from their face values.
Debt securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are
generally more sensitive to interest rate changes than short-term
bonds.
Lower- quality debt securities ( sometimes called "junk bonds")
are often considered to be speculative and involve greater risk of default
or price changes due to changes in the issuer's creditworthiness. The
market prices of these securities may fluctuate more than
higher- quality securities and may decline significantly in periods
of general economic difficulty.
The table on page __ provides a summary of ratings assigned to debt
holdings (not including money market instruments) in the fund's portfolio.
These figures are dollar-weighted averages of month-end portfolio holdings
during fiscal 199 4 , and are presented as a percentage of total
investments. These percentages are historical and do not necessarily
indicate the fund's current or future debt holdings.
FISCAL 1993 DEBT HOLDINGS, BY RATING
MOODY'S INVESTORS STANDARD &
POOR'S
SERVICE, INC. CORPORATION
Rating Average* Rating Averag
e*
INVESTMENT GRADE
Highest quality Aaa AAA
High quality Aa % AA %
Upper-medium grade A A
Medium grade Baa .% BBB %
LOWER QUALITY
Moderately speculative Ba .% BB %
Speculative B .% B %
Highly speculative Caa .% CCC %
Poor quality Ca CC
Lowest quality, no interest C C %
In default, in arrears -- D %
% %
* THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED BY MOODY'S OR
S&P AMOUNTED TO %. THIS MAY INCLUDE SECURITIES RATED BY OTHER
NATIONALLY RECOGNIZED RATING SERVICES, AS WELL AS UNRATED SECURITIES.
FMR
HAS DETERMINED THAT UNRATED SECURITIES THAT ARE LOWER QUALITY ACCOUNT
FOR
___% OF THE FUND'S INVESTMENTS. REFER TO THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION FOR A MORE COMPLETE DISCUSSION OF THESE RATINGS.
.%
RESTRICTIONS: The fund does not currently intend to invest more than
20% of its total assets in debt securities.
FOREIGN SECURITIES and foreign currencies may involve additional risks.
These include currency fluctuations, risks relating to political or
economic conditions in the foreign country, and the potentially less
stringent investor protection and disclosure standards of foreign markets.
In addition to the political and economic factors that can affect foreign
securities, a governmental issuer may be unwilling to repay principal and
interest when due, and may require that the conditions for payment be
renegotiated. These factors could make foreign investments, especially
those in developing countries, more volatile.
RESTRICTIONS: No more than 40% of the fund's assets may be invested in
companies operating exclusively in one foreign country.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques
to increase or decrease its exposure to changing security prices, interest
rates, currency exchange rates, commodity prices, or other factors that
affect security values. These techniques may involve derivative
transactions such as buying and selling options and futures contracts,
entering into currency exchange contracts or swap agreements, and
purchasing indexed securities.
FMR can use these practices to adjust the risk and return characteristics
of the fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
DIRECT DEBT. Loans and other direct debt instruments are interests in
amounts owed to another party by a company, government, or other borrower.
They have additional risks beyond conventional debt securities because they
may entail less legal protection for the fund, or there may be a
requirement that the fund supply additional cash to a borrower on demand.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund buys a security
at one price and simultaneously agrees to sell it back at a higher price.
Delays or losses could result if the other party to the agreement defaults
or becomes insolvent.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR under the supervision of the Board of Trustees, to be illiquid,
which means that they may be difficult to sell promptly at an acceptable
price. The sale of other securities may be subject to legal
restrictions. Difficulty in selling securities may result in a loss or
may be costly to the fund.
RESTRICTIONS: The fund may not purchase a security if, as a result, more
than 10% of its assets would be invested in illiquid securities.
DIVERSIFICATION. Diversifying a fund's investment portfolio can
reduce the risks of investing. This may include limiting the amount of
money invested in any one issuer or, on a broader scale, in any one
industry.
RESTRICTIONS: The fund may not invest more than 5% of its total assets in
any one issuer and may not invest more than 25% of its assets in any one
industry. These limitations do not apply to U.S. government securities.
BORROWING. The fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If the fund borrows money,
its share price may be subject to greater fluctuation until the borrowing
is paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: The fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 33% of its total assets.
LENDING. Lending securities to broker-dealers and institutions,
including FBSI, an affiliate of FMR, is a means of earning income. This
practice could result in a loss or a delay in recovering the fund's
securities. The fund may also lend money to other funds advised by FMR.
RESTRICTIONS: Loans, in the aggregate, may not exceed 33% of the fund's
total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraph restates all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraph, can be changed without shareholder approval.
The fund seeks capital appreciation through investments in securities of
domestic, foreign and multinational issuers. The fund normally
invests primarily in common stock and securities convertible into
common stock , but may also invest in other types of securities in
seeking its objective . No more than 40% of the fund's assets may be
invested in companies operating exclusively in any one foreign country.
No emphasis is placed on dividend income except when FMR believes this
income will have a favorable influence on the market value of the security.
The fund may not invest more than 5% of its total assets in any one issuer,
may not own more than 10% of the outstanding voting securities of a single
issuer, and may not invest more than 25% of its assets in any one industry.
The fund may borrow up to 33% of its total assets for temporary or
emergency purposes. Loans, in the aggregate, may not exceed 33% of the
fund's total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily
operations. Expenses paid out of the fund's assets are reflected in its
share price or dividends; they are neither billed directly to shareholders
nor deducted from shareholder accounts.
The fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn pays fees to affiliates who provide
assistance with these services. The fund also pays OTHER EXPENSES, which
are explained on page __.
FMR may, from time to time, agree to reimburse the fund for management
fees and other expenses above a specified limit. FMR retains the ability to
be repaid by the fund if expenses fall below the specified limit prior to
the end of the fiscal year. Reimbursement arrangements, which may be
terminated at any time without notice, can decrease the fund's expenses and
boost its performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. The amount
of the fee is determined by taking a BASIC FEE and then applying a
PERFORMANCE ADJUSTMENT. The performance adjustment either increases or
decreases the management fee, depending on how well the fund has performed
relative to the S&P 500.
Management Basic Performan
ce
fee fee adjustmen
t
=
+/-
THE BASIC FEE (calculated monthly) is calculated by adding a group fee
rate to an individual fund fee rate, and multiplying the result by the
fund's average net assets. The group fee rate is based on the average net
assets of all the mutual funds advised by FMR. This rate cannot rise above
.52%, and it drops as total assets under management increase.
For March 1994, the group fee rate was . %. The individual fund fee
rate is .30%. The basic fee rate for fiscal 1994 was . %.
THE PERFORMANCE ADJUSTMENT rate is calculated monthly by comparing the
fund's performance to that of the S&P 500 over the most recent 36-month
period. The difference is translated into a dollar amount that is added to
or subtracted from the basic fee. The maximum annualized performance
adjustment rate is +.20%.
The total management fee rate for fis cal 1994 was . %. This rate
was higher
than that of most other mutual funds as a result of a positive performance
adjustment.
FMR HAS SUB-ADVISORY AGREEMENTS with FMR U.K. and FMR Far East. These
sub-advisers provide FMR with investment research and advice on companies
based outside the United States. Under the sub-advisory agreements, FMR
pays FMR U.K. and FMR Far East fees equal to 110% and 105%, respectively,
of the costs of providing these services.
The sub-advisers may also provide investment management services. In
return, FMR pays FMR U.K. and FMR Far East 50% of its management fee rate
with respect to the fund's investments that the sub-adviser manages on a
discretionary basis.
OTHER EXPENSES
While the management fee is a significant component of the fund's annual
operating costs, the fund has other expenses as well.
The fund contracts with FSC to perform many transaction and accounting
functions. These services include processing shareholder transactions,
valuing the fund's investments, and handling securities loans. In fiscal
1994, the fund paid FSC fees equal to . % of its average net
assets.
The fund also pays other expenses, such as legal, audit, and custodian
fees; proxy solicitation costs; and the compensation of trustees who are
not affiliated with Fidelity.
The fund's portfolio turnover rate for fiscal 1994 was %. This
rate varies from year to year. High turnover rates increase transaction
costs and may increase taxable capital gains. Of course, FMR considers
these effects when evaluating the anticipated benefits of short-term
investing.
UNDERSTANDING THE
MANAGEMENT FEE
(checkmark)
The basic fee FMR receives is designed to be responsive to changes
in FMR's total a ssets under management. Building this variable
into the fee calculation assures shareholders that they will pay a lower
rate as FMR's assets under management increase.
Another variable, the performance adjustment, rewards FMR when the fund
outperforms the S&P 500 (an established index of stock market
performance) and reduces FMR's fee when the fund underperforms this
index.
<r>YOUR ACCOUNT</r>
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of America's
first mutual funds. Today, Fidelity is the largest mutual fund company in
the country, and is known as an innovative provider of high-quality
financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage Services,
Inc. (FBSI). Fidelity is also a leader in providing tax-sheltered
retirement plans for individuals investing on their own or through their
employer.
Fidelity is committed to providing investors with practical information to
make investment decisions. Based in Boston, Fidelity provides customers
with complete service 24 hours a day, 365 days a year, through a network of
telephone service centers around the country.
To reach Fidelity for general information, call these numbers:
(bullet) For mutual funds, 1-800-544-8888
(bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity has
over __ walk-in Investor Centers ac ross the country.
TYPES OF ACCOUNTS
You may set up an account directly in the fund or, if you own or intend to
purchase individual securities as part of your total investment portfolio,
you may consider investing in the fund through a brokerage account.
If you are investing through FBSI or another financial institution or
investment professional, refer to its program materials for any special
provisions regarding your investment in the fund.
The different ways to set up (register) your account with Fidelity are
listed at right.
The account guidelines that follow may not apply to certain retirement
accounts. If your employer offers the fund through a retirement program,
contact your employer for more information. Otherwise, call Fidelity
directly.
FIDELITY FACTS
(checkmark)
Fidelity offers the broadest selection of mutual funds in the world.
(bullet) Number of Fidelity mutual funds: over
(bullet) Assets in Fidelity mutual funds: over $ billion
(bullet) Number of shareholder accounts: over million
(bullet) Number of investment analysts and portfolio managers: over
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
RETIREMENT
TO SHELTER YOUR RETIREMENT SAVINGS FROM TAXES
Retirement plans allow individuals to shelter investment income and
capital gains from current taxes. In addition, contributions to these
accounts may be tax deductible. Retirement accounts require special
applications
and typically have lower minimums.
(bullet) INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of legal age
and under 70 with earned income to invest up to $2,000 per tax year.
Individuals can also invest in a spouse's IRA if the spouse has earned
income of less than $250.
(bullet) ROLLOVER IRAS retain special tax advantages for certain
distributions from employer-sponsored retirement plans.
(bullet) KEOGH OR CORPORATE PROFIT SHARING AND MONEY PURCHASE PENSION PLANS
allow self-employed individuals or small business owners (and their
employees) to make tax-deductible contributions for themselves and any
eligible employees up to $30,000 per year.
(bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide small
business owners or those with self-employed income (and their eligible
employees) with many of the same advantages as a Keogh, but with fewer
administrative requirements.
(bullet) 403(B) CUSTODIAL ACCOUNTS are available to employees of most
tax-exempt institutions, including schools, hospitals, and other charitable
organizations.
(bullet) 401(K) PROGRAMS allow employees of corporations of all sizes to
contribute a percentage of their wages on a tax-deferred basis. These
accounts need to be established by the trustee of the plan.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, O R
OTHER GROUPS
Requires a special application.
HOW TO BUY SHARES
ONCE EACH BUSINESS DAY, TWO SHARE PRICES ARE CALCULATED FOR THE FUND:
the offering price and net asset value (NAV). The offering price includes
the 3% sales charge, which you pay when you buy shares, unless you qualify
for a reduction or waiver as described on page __. When you buy shares at
the offering price, Fidelity deducts 3% and invests the rest at the NAV.
Shares are purchased at the next share price calculated after your
investment is received and accepted. Share price is normally calculated at
4 p.m. Eastern time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application and
mail it along with your check. You may also open your account in person or
by wire as described on page 11. If there is no application accompanying
this prospectus, call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(bullet) Mail in an application with a check, or
(bullet) Open your account by exchanging from another Fidelity fund.
IF YOU ARE INVESTING THROUGH A TAX-SHELTERED RETIREMENT PLAN, such as an
IRA, for the first time, you will need a special application. Retirement
investing also involves its own investment procedures. Call 1-800-544-8888
for more information and a retirement application.
If you buy shares by check or Fidelity Money Line(Registered trademark),
and then sell those shares by any method other than by exchange to another
Fidelity fund, the payment may be delayed for up to seven business days to
ensure that your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For Fidelity retirement accounts $500
TO ADD TO AN ACCOUNT $250
For Fidelity retirement accounts $250
Through automatic investment plans $100
MINIMUM BALANCE $1,000
For Fidelity retirement accounts $500
UNDERSTANDING
SHARE PRICE
(checkmark)
Let's say you invest $2,500 at an offering price of $10. Of the $10
offering price, 3% ($.30) is the sales charge, and 97% ($9.70) represents
the NAV. The value of your initial investment will be $2,425 (250 shares
worth $9.70 each), and you will have paid a sales charge of $75.
Row: 1, Col: 1, Value: 25.0
Row: 1, Col: 2, Value: 75.0
Row: 1, Col: 3, Value: 75.0
Row: 1, Col: 4, Value: 75.0
Row: 1, Col: 5, Value: 75.0
Row: 1, Col: 6, Value: 75.0
Row: 1, Col: 7, Value: 75.0
Row: 1, Col: 8, Value: 75.0
Row: 1, Col: 9, Value: 75.0
Row: 1, Col: 10, Value: 75.0
Row: 1, Col: 11, Value: 75.0
Row: 1, Col: 12, Value: 75.0
Row: 1, Col: 13, Value: 75.0
Row: 1, Col: 14, Value: 75.0
Row: 1, Col: 15, Value: 75.0
Row: 1, Col: 16, Value: 75.0
Row: 1, Col: 17, Value: 75.0
Row: 1, Col: 18, Value: 75.0
Row: 1, Col: 19, Value: 75.0
Row: 1, Col: 20, Value: 75.0
Row: 1, Col: 21, Value: 75.0
Row: 1, Col: 22, Value: 75.0
Row: 1, Col: 23, Value: 75.0
Row: 1, Col: 24, Value: 75.0
Row: 1, Col: 25, Value: 75.0
Row: 1, Col: 26, Value: 75.0
Row: 1, Col: 27, Value: 75.0
Row: 1, Col: 28, Value: 75.0
Row: 1, Col: 29, Value: 75.0
Row: 1, Col: 30, Value: 75.0
Row: 1, Col: 31, Value: 75.0
Row: 1, Col: 32, Value: 75.0
Row: 1, Col: 33, Value: 75.0
Row: 1, Col: 34, Value: 75.0
$2,500 Investment
3% sales charge = $75
Value of Investment = $2,425
<TABLE>
<CAPTION>
<S> <C> <C>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
PHONE (bullet) Exchange from another (bullet) Exchange from another
1-800-544-7777 Fidelity fund account Fidelity fund account
with the same with the same
registration, including registration, including
name, address, and name, address, and
taxpayer ID number. taxpayer ID number.
(bullet) Use Fidelity Money
Line to transfer from
your bank account. Call
before your first use to
verify that this service
is in place on your
account.
MAIL (bullet) Complete and sign the (bullet) Make your check
application. Make your payable to "Fidelity
check payable to Magellan Fund."
"Fidelity Magellan Indicate your fund
Fund." Mail to the account number on
address indicated on your chec k and mail to
the application. the address printed on
y our account statement.
(bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
IN PERSON (bullet) Bring your application (bullet) Bring your check to a
and check to a Fidelity Fidelity Investor Center.
Investor Center. Call Call 1-800-544-9797 for
1-800-544-9797 for the the center nearest you.
center nearest you.
WIRE (bullet) Call 1-800-544-7777 to (bullet) Not available for
set up your account retirement accounts.
and to arrange a wire (bullet) Wire to:
transaction. Not Bankers Trust
available for retirement Company,
accounts. Bank Routing
(bullet) Wire within 24 hours to: #021001033,
Bankers Trust Account #00163053.
Company, Specify "Fidelity
Bank Routing Magellan Fund" and
#021001033, include your account
Account #00163053. number and your
Specify "Fidelity name.
Magellan Fund" and
include your new
account number and
your name.
AUTOMATICALLY (bullet) Not available . (bullet) Use Fidelity Automatic
Account Builder. Sign
up for this service
when opening your
account, or
call 1-800-544-6666 to
add to it.
TDD - SERVICE FOR THE DEAF AND HEARING-IMPAIRED: 1-800-544-0118
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next share price calculated after your order is received and accepted.
Share price is normally calculated at 4 p.m. Eastern time.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the methods
described on these two pages.
TO SELL SHARES IN A FIDELITY RETIREMENT ACCOUNT, your request must be made
in writing, except for exchanges to other Fidelity funds, which can be
requested by phone or in writing. Call 1-800-544-6666 for a retirement
distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $1,000
worth of shares in the account to keep it open ($500 for retirement
accounts).
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to sign
up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations
applies:
(bullet) You wish to redeem more than $100,000 worth of shares,
(bullet) Your account registration has changed within the last 30 days,
(bullet) The check is being mailed to
a different address than the one on your account (record address),
(bullet) The check is being made payable to someone other than the account
owner, or
(bullet) The redemption proceeds are being transferred to a Fidelity
account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if authorized
under state law), securities exchange or association, clearing agency, or
savings association. A notary public cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(bullet) Your name,
(bullet) The fund's name,
(bullet) Your fund account number,
(bullet) The dollar amount or number of shares to be redeemed, and
(bullet) Any other applicable requirements listed in the table at right.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
<TABLE>
<CAPTION>
<S> <C> <C>
ACCOUNT TYPE SPECIAL REQUIREMENTS
PHONE All account types (bullet) Maximum check request:
1-800-544-7777 except retirement $100,000
(bullet) For Money Line transfers to
All account types your bank account; minimum :
$10; maximum: $100,000
(bullet) You may exchange to other
Fidelity funds if both
accounts are registered with
the same name(s), address,
and taxpayer ID number.
MAIL OR IN PERSON Individual, Joint (bullet) The letter of instruction must
Tenants, be signed by all persons
Sole Proprietorship required to sign for
s, UGMA, UTMA transactions, exactly as their
Retirement names appear on the
accounts account.
(bullet) The account owner should
complete a retirement
Trust distribution form. Call
1-800-544-6666 to request
one.
(bullet) The trustee must sign the
letter indicating capacity as
Business or trustee. If the trustee's name
Organization is not in the account
registration, provide a copy
of the trust document
certified within the last 60
days.
Executor, (bullet) At least one person
Administrator, authorized by corporate
Conservator, resolution to act on the
Guardian account must sign the letter.
(bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(bullet) Call 1-800-544-6666 for
instructions.
WIRE All account types (bullet) You must sign up for the wire
except retirement feature before using it. To
verify that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(bullet) Your wire redemption request
must be received by Fidelity
before 4 p.m. Eastern time
for money to be wired on the
next business day.
TDD - SERVICE FOR THE DEAF AND HEARING-IMPAIRED: 1-800-544-0118
</TABLE>
INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days
a year. Whenever you call, you can speak with someone equipped to provide
the information or service you need.
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(bullet) Confirmation statements (after every transaction, except
reinvestments, that affects your account balance or your account
registration)
(bullet) Account statements (quarterly)
(bullet) F inancial reports (every six months)
24-HOUR SERVICE
(checkmark)
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT BALANCES
1-800-544-7544
EXCHANGES AND REDEMPTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
QUOTES
1-800-544-8544
RETIREMENT ACCOUNT ASSISTANCE
1-800-544-4774
AUTOMATED SERVICE
To reduce expenses, only one copy of most financial reports will be
mailed to your household, even if you have more than one account in the
fund. Call 1-800-544-6666 if you need copies of financial reports or
historical account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of other
Fidelity funds by telephone or in writing. The shares you exchange
will carry credit for any sales charge you previously paid in connection
with their purchase.
Note that exchanges out of the fund are limited to four per calendar year,
and that they may have tax consequences for you. For complete policies and
restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see page 20.
SYSTEMATIC WITHDRAWAL PLANS let you set up monthly or quarterly redemptions
from your account. Because of the fund's sales charge, you may not want to
set up a systematic withdrawal plan during a period when you are buying
shares on a regular basis.
FIDELITY MONEY LINE(Registered trademark) enables you to transfer money by
phone between your bank account and your fund account. Most transfers are
complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly.
Fidelity offers convenient services that let you transfer money into your
fund account, or between fund accounts, automatically. While regular
investment plans do not guarantee a profit and will not protect you against
loss in a declining market, they can be an excellent way to invest for
retirement, a home, educational expenses, and other long-term financial
goals. Certain restrictions apply for retirement accounts. Call
1-800-544-6666 for more information.
<TABLE>
<CAPTION>
<S> <C> <C>
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly or (bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(bullet) For existing accounts, call
1-800-544-6666 for an application.
(bullet) To change the amount or frequency of
your investment, call 1-800-544-6666 at
least three business days prior to your
next scheduled investment date.
DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUND*
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Every pay (bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(bullet) Changes require a new authorization
form.
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, (bullet) To establish, call 1-800-544-6666 after
bimonthly, your account is opened.
quarterly, or (bullet) To change the amount or frequency of
annually your investment, call 1-800-544-6666.
* BECAUSE ITS SHARE PRICE FLUCTUATES, THE FUND MAY NOT BE AN APPROPRIATE
CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
</TABLE>
<r>SHAREHOLDER AND ACCOUNT POLICIES</r>
DIVIDENDS, CAPITAL
GAINS, AND TAXES
The fund distributes substantially all of its net income and capital gains
to shareholders each year. Normally, dividends and capital gains are
distributed in May and December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on the
application, call 1-800-544-6666 for instructions. The fund offers four
options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions will
be automatically reinvested in additional shares of the fund. If you do not
indicate a choice on your application, you will be assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested, but you will be sent a check for each dividend
distribution.
3. CASH OPTION. You will be sent a check for each dividend and capital gain
distribution.
4. DIRECTED DIVIDENDS(Registered trademark) OPTION. Your dividends and
capital gain distributions will be automatically invested in another
identically registered Fidelity fund.
FOR RETIREMENT ACCOUNTS, all distributions are automatically reinvested.
When you are over 59 years old, you can receive distributions in cash.
SHARES PURCHASED THROUGH REINVESTMENT of dividend and capital gain
distributions are not subject to the fund's 3% sales charge. Likewise, if
you direct distributions to a fund with a 3% sales charge, you will not pay
a sales charge on those purchases.
When the fund deducts a distribution from its NAV , the reinvestment
price is the fund's NAV at the close of business that day. Cash
distribution checks will be mailed within seven days.
UNDERSTANDING
DISTRIBUTIONS
(checkmark)
As a fund shareholder, you are entitled to your share of the fund's net
income and gains on its investments. The fund passes its earnings along to
its investors as DISTRIBUTIONS.
The fund earns dividends from stocks and interest from bond, money
market, and other investments. These are passed along as DIVIDEND
DISTRIBUTIONS. The fund realizes capital gains whenever it sells securities
for a higher price than it paid for them. These are passed along as CAPITAL
GAIN DISTRIBUTIONS.
TAXES
As with any investment, you should consider how your investment in the fund
will be taxed. If your account is not a tax-deferred retirement account,
you should be aware of the following tax implications:
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax,
and may also be subject to state or local taxes. If you live outside the
United States, your distributions could also be taxed by the country in
which you reside. Your distributions are taxable when they are paid,
whether you take them in cash or reinvest them in additional shares.
However, distributions declared in December and paid in January are taxable
as if they were paid on December 31.
For federal tax purposes, the fund's income and short-term capital gain
distributions are taxed as dividends; long-term capital gain distributions
are taxed as long-term capital gains. Every January, Fidelity will send you
and the IRS a statement showing the taxable distributions paid to you in
the previous year.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - are subject to capital gains tax. A capital gain or loss
is the difference between the cost of your shares and the price you receive
when you sell them.
Whenever you sell shares of the fund, Fidelity will send you a confirmation
statement showing how many shares you sold and at what price. You will also
receive a consolidated transaction statement every January. However, it is
up to you or your tax preparer to determine whether this sale resulted in a
capital gain and, if so, the amount of tax to be paid. Be sure to keep your
regular account statements; the information they contain will be essential
in calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares just before the fund deducts a
distribution from its NAV , you will pay the full price for the
shares and then receive a portion of the price back as a taxable
distribution.
There are tax requirements that all funds must follow in order to avoid
federal taxation. In its effort to adhere to these requirements, the fund
may have to limit its investment activity in some types of instruments.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Fidelity normally calculates the fund's NAV and offering
price as of the close of business of the NYSE, normally 4 p.m. Eastern
time.
THE FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
The fund's assets are valued primarily on the basis of market
quotations . If quotations are not readily available, assets are valued
by a method that the Board of Trustees believes accurately reflects
fair value. Foreign securities are valued on the basis of quotations from
the primary market in which they are traded, and are translated from the
local currency into U.S. dollars using current exchange rates.
THE OFFERING PRICE (price to buy one share) is the fund's NAV plus a sales
charge. The sales charge is 3% of the offering price, or 3.09% of the net
amount invested. The REDEMPTION PRICE (price to sell one share) is the
fund's NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require the fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Note that
Fidelity will not be responsible for any losses resulting from unauthorized
transactions if it follows reasonable procedures designed to verify the
identity of the caller. Fidelity will request personalized security codes
or other information, and may also record calls. You should verify the
accuracy of your confirmation statements immediately after you receive
them. If you do not want the ability to redeem and exchange by telephone,
call Fidelity for instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or by
visiting a Fidelity Investor Center.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. The fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page __ . Purchase orders may be refused if, in FMR's opinion,
they are of a size that would disrupt management of the fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the
next offering price calculated after your order is received and accepted.
Please note the following:
(bullet) All of your purchases must be made in U.S. dollars and checks
must be drawn on U.S. banks.
(bullet) Fidelity does not accept cash.
(bullet) When making a purchase with more than one check, each check must
have a value of at least $50.
(bullet) The fund reserves the right to limit the number of checks
processed at one time.
(bullet) If your check does not clear, your purchase will be cancelled and
you could be liable for any losses or fees the fund or its transfer agent
has incurred.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money order,
U.S. Treasury check, Federal Reserve check, or direct deposit instead.
YOU MAY BUY SHARES OF THE FUND (AT THE OFFERING PRICE) OR SELL THEM THROUGH
A BROKER, who may charge you a fee for this service. If you invest through
a broker or other institution, read its program materials for any
additional service features or fees that may apply.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with
Fidelity Distributors Corporation (FDC) may enter confirmed purchase orders
on behalf of customers by phone, with payment to follow no later than the
time when the fund is priced on the following business day. If payment is
not received by that time, the financial institution could be held liable
for resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your request is received and accepted. Please
note the following:
(bullet) Normally, redemption proceeds will be mailed to you on the next
business day, but if making immediate payment could adversely affect the
fund, it may take up to seven days to pay you.
(bullet) Fidelity Money Line redemptions generally will be credited to
your bank account on the second or third business day after your phone
call.
(bullet) The fund may hold payment on redemptions until it is reasonably
satisfied that investments made by check or Fidelity Money Line have been
collected, which can take up to seven business days.
(bullet) Redemptions may be suspended or payment dates postponed on days
when the NYSE is closed (other than weekends or holidays), when trading on
the NYSE is restricted, or as permitted by the SEC.
TO SELL CERTIFICATE SHARES, call 1-800-544-6666 for instructions. The fund
no longer issues certificate shares.
IF YOUR ACCOUNT BALANCE FALLS BELOW $1,000 , you w ill be given 30
days' notice to reestablish the minimum balance. If you do not increase
your balance, Fidelity reserves the right to close your account and send
the proceeds to you. Your shares will be redeemed at the NAV on the day
your account is closed.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC collects the proceeds from the fund's 3% sales charge and may pay a
portion of them to securities dealers who have sold the fund's shares, or
to others, including banks and other financial institutions
( q ualified r ecipients), under special arrangements in
connection with FDC's sales activities. The sales charge paid to
q ualified r ecipients is 1.5 % of the fund's offering
price.
FDC may, at its own expense, provide promotional incentives to
q ualified r ecipients who support the sale of shares of the
fund without reimbursement from the fund. In some instances, these
incentives may be offered only to certain institutions whose
representatives provide services in connection with the sale or expected
sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of the fund
for shares of other Fidelity funds. However, you should note the following:
(bullet) The fund you are exchanging into must be registered for sale in
your state.
(bullet) You may only exchange between accounts that are registered in the
same name, address, and taxpayer identification number.
(bullet) Before exchanging into a fund, read its prospectus.
(bullet) If you exchange into a fund with a sales charge, you pay the
percentage-point difference between that fund's sales charge and any sales
charge you have previously paid in connection with the shares you are
exchanging. For example, if you had already paid a sales charge of 2% on
your shares and you exchange them into a fund with a 3% sales charge, you
would pay an additional 1% sales charge.
(bullet) Exchanges may have tax consequences for you.
(bullet) Because excessive trading can hurt fund performance and
shareholders, the fund reserves the right to temporarily or permanently
terminate the exchange privilege of any investor who makes more than four
exchanges out of the fund per calendar year. Accounts under common
ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(bullet) The exchange limit may be modified for accounts in certain
institutional retirement plans to conform to plan exchange limits and
Department of Labor regulations. See your plan materials for further
information.
(bullet) The fund also reserves the right to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest the money effectively in accordance with its investment objective
and policies, or would otherwise potentially be adversely affected.
(bullet) Your exchanges may be restricted or refused if the fund receives
or anticipates simultaneous orders affecting significant portions of the
fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to the fund.
Although the fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time. The
fund reserves the right to terminate or modify the exchange privilege in
the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCTIONS. The fund's sales charge may be reduced if you invest
directly with Fidelity or through prototype or prototype-like retirement
plans sponsored by FMR or FMR Corp. Purchases made with assistance or
intervention from a financial intermediary are not eligible. The amount you
invest, plus the value of your account, must fall within the ranges shown
below. Call Fidelity to see if your purchase qualifies.
Net
Range Sales amount
charge investe
d
$0 - 249,999 3% 3.09%
$250,000 - 2% 2.04%
499,999
$500,000 1% 1.01%
999,999
$1,000,000 or none none
more
The sales charge will also be reduced by the percentage of any sales
charge you previously paid on investments in other Fidelity funds (not
including Fidelity's Foreign Currency Funds). Similarly, your shares carry
credit for any sales charge you would have paid if the reductions in the
table above had not existed. These sales charge credits only apply to
purchases made in one of the ways listed below, and only if you
continuously owned Fidelity fund shares or a Fidelity brokerage core
account, or participated in The CORPORATEplan for Retirement Program.
1. By exchange from another Fidelity fund.
2. With proceeds of a transaction within a Fidelity brokerage core
account, including any free credit balance, core money market fund, or
margin availability, to the extent such proceeds were derived form
redemption proceeds from another Fidelity fund.
3. With redemption proceeds from one of Fidelity's Foreign Currency
Funds, if the Foreign Currency Fund shares were originally purchased with
redemption proceeds from a Fidelity fund.
4. Through the Directed Dividends Option (see page 16).
5. By participants in The CORPORATEplan for Retirement Program when
shares are purchased through plan-qualified loan repayments, and for
exchanges into and out of the Managed Income Portfolio.
WAIVERS. The fund's sales charge will not apply:
1. If you buy shares as part of an employee benefit plan having more than
200 eligible employees or a minimum of $3 million in plan assets invested
in Fidelity mutual funds. Plan sponsors are encouraged to notify Fidelity
when they first satisfy either of these requirements.
2. To shares in a Fidelity Rollover IRA account purchased with the proceeds
of a distribution from an employee benefit plan, provided that at the time
of the distribution, the employer or its affiliate maintained a plan that
both qualified for waiver (1) above and had at least some of its assets
invested in Fidelity-managed products.
3. If you are a charitable organization (as defined in Section 501(c)(3) of
the Internal Revenue Code) investing $100,000 or more.
4. If you purchase transfer shares for a charitable remainder trust or life
income pool established for the benefit of a charitable organization (as
defined by Section 501(c)(3) of the Internal Revenue Code).
5. If you are an investor participating in the Fidelity Trust Portfolios
program.
6. To shares purchased through Portfolio Advisory Services.
7. If you are a current or former trustee or officer of a Fidelity fund or
a current or retired officer, director, or full-time employee of FMR Corp.
or its direct or indirect subsidiaries (a Fidelity Trustee or employee),
the spouse of a Fidelity trustee or employee, a Fidelity trustee or
employee acting as custodian for a minor child, or a person acting as
trustee of a trust for the sole benefit of the minor child of a Fidelity
trustee or employee.
8. If you are a bank trust officer, registered representative, or other
employee of a q ualified r ecipient, as defined on page 20.
These waivers must be qualified through FDC in advance. More
detailed information about waivers (1) , (2), and (5) is contained in
the Statement of Additional Information. A representative of your plan or
organization should call Fidelity for more information.
This prospectus is printed on recycled paper using soy-based inks.
FIDELITY MAGELLAN FUND
STATEMENT OF ADDITIONAL INFORMATION
MAY 20, 199 4
This Statement is not a prospectus but should be read in conjunction with
the fund's current Prospectus (dated May 20, 199 4 ). Please retain
this document for future reference. The Annual Report for the fiscal year
ended March 31, 199 4 is incorporated herein by reference. To
obtain an additional copy of the Prospectus or the Annual Report, please
call Fidelity Distributors Corporation at 1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Portfolio Transactions
Valuation of Portfolio Securities
Performance
Additional Purchase and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contract
Contracts with Companies Affiliated with FMR
Description of the Fund
Financial Statements
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc. (FMR U.K.)
Fidelity Management & Research (Far East) Inc. (FMR Far East)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
Fidelity Service Co. (FSC)
MAG-ptb-59 4
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of the fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in
values, net assets, or other circumstances will not be considered when
determining whether the investment complies with the fund's investment
policies and limitations.
The fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940) of the fund.
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) purchase the securities of any issuer if such purchase, at the time
thereof, would cause more than 5% of the value of the fund's total assets
at market to be invested in the securities of such issuer (other than
obligations of the United States government and its instrumentalities);
(2) purchase the securities of an issuer, if, as a result the fund would
own more than 10% of the outstanding voting securities of such issuer;
(3) issue senior securities , except as permitted under the Investment
Company Act of 1940;
(4 ) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceed ing 33 1/3% of its total assets (including the
a mount borrowed) less liabilities (other than borrowings). Any
borrowings that come to exceed this amount will be reduced within
three days (not including Sundays and holidays) to the extent
necessary to comply with the 33 1/3% limitation;
( 5 ) underwrite securities issued by others, except to the extent
that the fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of "restricted securities;"
( 6 ) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in these securities of companies whose principal
business activities are in the same industry;
( 7 ) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business);
( 8 ) purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities );
( 9 ) lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other
parties , but this limitation does not apply to purchase s
of debt securities or to repurchase agreements.
( 10 ) The fund may, not withstanding any other fundamental
investment policy or limitation, invest all of its assets in the securities
of a single open-end management investment company with substantially the
same fundamental investment objective, policies, and limitations as the
fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless
it own or has the right to obtain securities equivalent in kind and amount
to the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short;
(ii) The fund does not currently intend to purchase securities on
margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin;
( iii ) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation ( 4 )).
The fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
borrowings immediately after such borrowing would exceed 15% of the fund's
total assets.
( iv ) The fund does not currently intend to purchase any security
if, as a result, more than 10% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to legal
or contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
( v ) The fund does not currently intend to lend assets other than
securities to other parties, except by ( a ) lending money (up to 5%
of the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or ( b )
acquiring loans, loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated unfunded
commitments of the sellers. (This limitation does not apply to purchases
of debt securities or to repurchase agreements.)
(vi) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger;
(vii) The fund does not currently intend to purchase the securities of
any issuer (other than securities issued or guaranteed by domestic or
foreign governments or political subdivisions thereof) if, as a result,
more than 5% of its total assets would be invested in the securities of
business enterprises that, including predecessors, have a record of less
than three years of continuous operation;
(v iii ) The fund does not currently intend to purchase warrants,
valued at the lower of cost or market, in excess of 5% of the fund's net
assets. Included in that amount, but not to exceed 2% of the fund's net
assets, may be warrants that are not listed on the New York Stock Exchange
or the American Stock Exchange. Warrants acquired by the fund in units or
attached to securities are not subject to these restrictions.
(ix) The fund does not currently intend to invest all of its assets in
the securities of a single open-end management company with substantially
the same fundamental investment objective, policies, and limitations as the
fund.
For the fun d's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
beginning on page __.
AFFILIATED BANK TRANSACTIONS. T he fund may engage in transactions
with financial institution s that are, or may be considered to be,
"affiliated persons" of the fund under the Investment Company Act of
1940. These transactions may include repurchase agreements with
custodian banks; s hort-term obligations of, and repurchase
agreements with, the 50 largest U.S. banks (measured by deposits);
municipal securities; and transactions in U.S. government securities
with affiliated financial institutions that are primary dealers in
these securities ; short-term currency transactions; and short-term
borrowings. In accordance with exemptive orders issued by the Securities
and Exchange Commission, the Board of Trustees has established and
periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
FUND'S RIGHTS AS A SHAREHOLDER. The fund does not intend to direct or
administer the day-to-day operations of any company. The fund, however,
may exercise its rights as a shareholder and may communicate its views on
important matters of policy to management, the Board of Directors, and
shareholders of a company when FMR determines that such matters could have
a significant effect on the value of the fund's investment in the company.
The activities that the fund may engage in, either individually or in
conjunction with others, may include, among others, supporting or opposing
proposed changes in a company's corporate structure or business activities;
seeking changes in a company's directors or management; seeking changes in
a company's direction or policies; seeking the sale or reorganization of
the company or a portion of its assets; or supporting or opposing third
party takeover efforts. This area of corporate activity is increasingly
prone to litigation and it is possible that the fund could be involved in
lawsuits related to such activities. FMR will monitor such activities with
a view to mitigating, to the extent possible, the risk of litigation
against the fund and the risk of actual liability if the fund is involved
in litigation. No guarantee can be made, however, that litigation against
the fund will not be undertaken or liabilities incurred.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of the fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of the fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset the fund's rights and
obligations relating to the investment). Investments currently considered
by the fund to be illiquid include repurchase agreements not entitling the
holder to payment of principal and interest within seven days,
over-the-counter options, and non-government stripped fixed-rate
mortgage-backed securities. Also, FMR may determine some restricted
securities, government-stripped fixed-rate mortgage-backed securities,
loans and other direct debt instruments, and swap agreements to be
illiquid. However, with respect to over-the-counter options the fund
writes, all or a portion of the value of the underlying instrument may be
illiquid depending on the assets held to cover the option and the nature
and terms of any agreement the fund may have to close out the option before
expiration. In the absence of market quotations, illiquid investments are
priced at fair value as determined in good faith by a committee appointed
by the Board of Trustees. If through a change in values, net assets, or
other circumstances, the fund were in a position where more than 10% of its
net assets were invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, the fund may be obligated to pay all or part of
the registration expense and a considerable period may elapse between the
time it decides to seek registration and the time the fund may be permitted
to sell a security under an effective registration statement. If, during
such a period, adverse market conditions were to develop, the fund might
obtain a less favorable price than prevailed when it decided to seek
registration of the security.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. Direct debt instruments are
interests in amounts owed by a corporate, governmental, or other borrower
to lenders or lending syndicates (loans and loan participations), to
suppliers of goods or services (trade claims or other receivables), or to
other parties. Direct debt instruments are subject to the fund's policies
regarding the quality of debt securities.
Purchasers of loans and other forms of direct indebtedness depend primarily
upon the creditworthiness of the borrower for payment of principal and
interest. Direct debt instruments may not be rated by any nationally
recognized rating service. If the fund does not receive scheduled interest
or principal payments on such indebtedness, the fund's share price could be
adversely affected. Loans that are fully secured offer the fund more
protections than an unsecured loan in the event of non-payment of scheduled
interest or principal. However, there is no assurance that the liquidation
of collateral from a secured loan would satisfy the borrower's obligation,
or that the collateral can be liquidated. Indebtedness of borrowers whose
creditworthiness is poor involves substantially greater risks and may be
highly speculative. Borrowers that are in bankruptcy or restructuring may
never pay off their indebtedness, or may pay only a small fraction of the
amount owed. Direct indebtedness of developing countries also
involve s a risk that the governmental entities responsible for the
repayment of the debt may be unable, or unwilling, to pay interest and
principal when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to the fund.
For example, if a loan is foreclosed, the fund could become part owner of
any collateral, and would bear the costs and liabilities associated with
owning and disposing of the collateral. In addition, it is conceivable
that under emerging legal theories of lender liability, the fund could be
held liable as a co-lender. Direct debt instruments may also involve a
risk of insolvency of the lending bank or other intermediary. Direct debt
instruments that are not in the form of securities may offer less legal
protection to the fund in the event of fraud or misrepresentation. In the
absence of definitive regulatory guidance, the fund relies on FMR's
research in an attempt to avoid situations where fraud or misrepresentation
could adversely affect the fund.
A loan is often administered by a bank or other financial institution that
acts as agent for all holders. The agent administers the terms of the
loan, as specified in the loan agreement. Unless, under the terms of the
loan or other indebtedness, the fund has direct recourse against the
borrower, it may have to rely on the agent to apply appropriate credit
remedies against a borrower. If assets held by the agent for the benefit
of the fund were determined to be subject to the claims of the agent's
general creditors, the fund might incur certain costs and delays in
realizing payment on the loan or loan participation and could suffer a loss
of principal or interest.
Direct indebtedness purchased by the fund may include letters of credit,
revolving credit facilities, or other standby financing commitments
obligating the fund to pay additional cash on demand. These commitments
may have the effect of requiring the fund to increase its investment in a
borrower at a time when it would not otherwise have done so, even if the
borrower 's condition makes it unlikely that the amount will ever be
repaid. The fund will set aside appropriate liquid assets in a segregated
custodial account to cover its potential obligations under standby
financing commitments.
The fund limits the amount of total assets that it will invest in any one
issuer or in issuers within the same industry (see limitations 1 and
6 ). For purposes of these limitations, the fund generally will
treat the borrower as the "issuer" of indebtedness held by the fund. In
the case of loan participations where a bank or other lending institution
serves as financial intermediary between the fund and the borrower, if the
participation does not shift to the fund the direct debtor-creditor
relationship with the borrower, SEC interpretations require the fund, in
appropriate circumstances, to treat both the lending bank or other lending
institution and the borrower as "issuers" for the se purposes .
Treating a financial intermediary as an issuer of indebtedness may restrict
the fund's ability to invest in indebtedness related to a single financial
intermediary, or a group of intermediaries engaged in the same industry,
even if the underlying borrowers represent many different companies and
industries.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund purchases a
security and simultaneously commits to resell that security to the seller
at an agreed upon price on an agreed upon date within a number of days from
the date of purchase. The resale price reflects the purchase price plus an
agreed upon incremental amount which is unrelated to the coupon rate or
maturity of the purchased security. A repurchase agreement involves the
obligation of the seller to pay the agreed upon price, which obligation is
in effect secured by the value (at least equal to the amount of the agreed
upon resale price and marked to market daily) of the underlying security.
The fund may engage in repurchase agreements with respect to any
security in which it is authorized to invest. While it does not presently
appear possible to eliminate all risks from these transactions
(particularly the possibility of a decline in the market value of the
underlying securities, as well as delays and costs to the fund in
connection with bankruptcy proceedings), it is the fund's current policy to
limit repurchase agreement transactions to those parties whose
creditworthiness has been reviewed and found satisfactory by FMR.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, the fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
The fund will enter into reverse repurchase agreements only with parties
whose creditworthiness has been found satisfactory by FMR. Such
transactions may increase fluctuations in the market value of the fund's
assets and may be viewed as a form of leverage.
INTERFUND BORROWING PROGRAM. The fund has received permission from the SEC
to lend money to and borrow money from other funds advised by FMR or its
affiliates. Interfund loans and borrowings normally will extend overnight,
but can have a maximum duration of seven days. Loans may be called on one
day's notice. The fund will lend through the program only when the returns
are higher than those available at the same time from other short-term
instruments (such as repurchase agreements), and will borrow through the
program only when the costs are equal to or lower than the cost of bank
loans. The fund may have to borrow from a bank at a higher interest rate
if an interfund loan is called or not renewed. Any delay in repayment to a
lending fund could result in a lost investment opportunity or additional
borrowing costs.
SECURITIES LENDING. The fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the New York Stock Exchange and
a subsidiary of FMR Corp.
Securities lending allows the fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there may
be delays in the recovery of loaned securities, or even a loss of rights in
collateral supplied should the borrower fail financially, loans will be
made only to parties deemed by FMR to be of good standing. Furthermore,
they will only be made if, in FMR's judgment, the consideration to be
earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC Staff that the fund
may engage in loan transactions only under the following conditions: (1)
the fund must receive 100% collateral in the form of cash or cash
equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of
the collateral; (3) after giving notice, the fund must be able to terminate
the loan at any time; (4) the fund must receive reasonable interest on the
loan or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest, or other distributions on the securities loaned and to
any increase in market value; (5) the fund may pay only reasonable
custodian fees in connection with the loan; and (6) the Board of Trustees
must be able to vote proxies on the securities loaned, either by
terminating the loan or by entering into an alternative arrangement with
the borrower.
Cash received through loan transactions may be invested in any security in
which the fund is authorized to invest. Investing this cash subjects that
investment, as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
SWAP AGREEMENTS. Swap agreements can be individually negotiated and
structured to include exposure to a variety of different types of
investments or market factors. Depending on their structure, swap
agreements may increase or decrease the fund's exposure to long- or
short-term interest rates (in the U.S. or abroad), foreign currency values,
mortgage securities, corporate borrowing rates, or other factors such as
security prices or inflation rates. Swap agreements can take many
different forms and are known by a variety of names. The fund is not
limited to any particular form of swap agreement if FMR determines it is
consistent with the fund's investment objective and policies.
In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a fee
by the other party. For example, the buyer of an interest rate cap obtains
the right to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines
elements of buying a cap and selling a floor.
Swap agreements will tend to shift the fund's investment exposure from one
type of investment to another. For example, if the fund agreed to exchange
payments in dollars for payments in foreign currency, the swap agreement
would tend to decrease the fund's exposure to U.S. interest rates and
increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options. Depending
on how they are used, swap agreements may increase or decrease the overall
volatility of the fund's investments and its share price.
The most significant factor in the performance of swap agreements is the
change in the specific interest rate, currency, or other factors that
determine the amounts of payments due to and from the fund. If a swap
agreement calls for payments by the fund, the fund must be prepared to make
such payments when due. In addition, if the counterparty's
creditworthiness declined, the value of a swap agreement would be likely to
decline, potentially resulting in losses. The fund expects to be able to
eliminate its exposure under swap agreements either by assignment or other
disposition, or by entering into an offsetting swap agreement with the same
party or a similarly creditworthy party.
The fund will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If the
fund enters into a swap agreement on a net basis, it will segregate assets
with a daily value at least equal to the excess, if any, of the fund's
accrued obligations under the swap agreement over the accrued amount the
fund is entitled to receive under the agreement. If the fund enters into a
swap agreement on other than a net basis, it will segregate assets with a
value equal to the full amount of the fund's accrued obligations under the
agreement.
INDEXED SECURITIES. The fund may purchase securities whose prices are
indexed to the prices of other securities, securities indices, currencies,
precious metals or other commodities, or other financial indicators.
Indexed securities typically, but not always, are debt securities or
deposits whose value at maturity or coupon rate is determined by reference
to a specific instrument or statistic. Gold-indexed securities, for
example, typically provide for a maturity value that depends on the price
of gold, resulting in a security whose price tends to rise and fall
together with gold prices. Currency-indexed securities typically are
short-term to intermediate-term debt securities whose maturity values or
interest rates are determined by reference to the values of one or more
specified foreign currencies, and may offer higher yields than U.S.
dollar-denominated securities of equivalent issuers. Currency-indexed
securities may be positively or negatively indexed; that is, their maturity
value may increase when the specified currency value increases, resulting
in a security that performs similarly to a foreign-denominated instrument,
or their maturity value may decline when foreign currencies increase,
resulting in a security whose price characteristics are similar to a put on
the underlying currency. Currency-indexed securities may also have prices
that depend on the values of a number of different foreign currencies
relative to each other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they
are indexed, and may also be influenced by interest rate changes in the
U.S. and abroad. At the same time, indexed securities are subject to the
credit risks associated with the issuer of the security, and their values
may decline substantially if the issuer's creditworthiness deteriorates.
Recent issuers of indexed securities have included banks, corporations, and
certain U.S. government agencies. Indexed securities may be more
volatile than the underlying instruments.
FOREIGN INVESTMENTS. Foreign investments can involve significant risks in
addition to the risks inherent in U.S. investments. The value of
securities denominated in or indexed to foreign currencies, and of
dividends and interest from such securities, can change significantly when
foreign currencies strengthen or weaken relative to the U.S. dollar.
Foreign securities markets generally have less trading volume and less
liquidity than U.S. markets, and prices on some foreign markets can be
highly volatile. Many foreign countries lack uniform accounting and
disclosure standards comparable to those applicable to U.S. companies, and
it may be more difficult to obtain reliable information regarding an
issuer's financial condition and operations. In addition, the costs of
foreign investing, including withholding taxes, brokerage commissions, and
custodial costs, are generally higher than for U.S. investments.
Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including
those involving the release of assets in advance of payment, may involve
increased risks in the event of a failed trade or the insolvency of a
broker-dealer, and may involve substantial delays. It may also be
difficult to enforce legal rights in foreign countries.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments
adverse to the interests of U.S. investors, including the possibility of
expropriation or nationalization of assets, confiscatory taxation,
restrictions on U.S. investment or on the ability to repatriate assets or
convert currency into U.S. dollars, or other government intervention.
There may be a greater possibility of default by foreign governments or
foreign government-sponsored enterprises. Investments in foreign countries
also involve a risk of local political, economic, or social instability,
military action or unrest, or adverse diplomatic developments. There is no
assurance that FMR will be able to anticipate these potential events or
counter their effects.
The considerations noted above generally are intensified for investments in
developing countries. Developing countries may have relatively unstable
governments, economies based on only a few industries, and securities
markets that trade a small number of securities.
The fund may invest in foreign securities that impose restrictions on
transfer within the U.S. or to U.S. persons. Although securities subject
to transfer restrictions may be marketable abroad, they may be less liquid
than foreign securities of the same class that are not subject to such
restrictions.
American Depositary Receipts and European Depositary Receipts (ADRs and
EDRs) are certificates evidencing ownership of shares of a foreign-based
issuer held in trust by a bank or similar financial institution. Designed
for use in U.S. and European securities markets, respectively, ADRs and
EDRs are alternatives to the purchase of the underlying securities in their
national markets and currencies.
FOREIGN CURRENCY TRANSACTIONS. The fund may hold foreign currency deposits
from time to time, and may convert dollars and foreign currencies in the
foreign exchange markets. Currency conversion involves dealer spreads and
other costs, although commissions usually are not charged. Currencies may
be exchanged on a spot (i.e., cash) basis, or by entering into forward
contracts to purchase or sell foreign currencies at a future date and
price. Forward contracts generally are traded in an interbank market
conducted directly between currency traders (usually large commercial
banks) and their customers. The parties to a forward contract may agree to
offset or terminate the contract before its maturity, or may hold the
contract to maturity and complete the contemplated currency exchange.
The fund may use currency forward contracts to manage currency risks and to
facilitate transactions in foreign securities. The following discussion
summarizes the principal currency management strategies involving forward
contracts that could be used by the fund.
In connection with purchases and sales of securities denominated in foreign
currencies, the fund may enter into currency forward contracts to fix a
definite price for the purchase or sale in advance of the trade's
settlement date. This technique is sometimes referred to as a "settlement
hedge" or "transaction hedge." FMR expects to enter into settlement hedges
in the normal course of managing the fund's foreign investments. The fund
could also enter into forward contracts to purchase or sell a foreign
currency in anticipation of future purchases or sales of securities
denominated in foreign currency, even if the specific investments have not
yet been selected by FMR.
The fund may also use forward contracts to hedge against a decline in the
value of existing investments denominated in foreign currency. For
example, if the fund owned securities denominated in pounds sterling, it
could enter into a forward contract to sell pounds sterling in return for
U.S. dollars to hedge against possible declines in the pound's value. Such
a hedge (sometimes referred to as a "position hedge") would tend to offset
both positive and negative currency fluctuations, but would not offset
changes in security values caused by other factors. The fund could also
hedge the position by selling another currency expected to perform
similarly to the pound sterling -- for example, by entering into a forward
contract to sell Deutsche marks or European Currency Units in return
for U.S. dollars. This type of hedge, sometimes referred to as a "proxy
hedge," could offer advantages in terms of cost, yield, or efficiency, but
generally will not hedge currency exposure as effectively as a simple hedge
into U.S. dollars. Proxy hedges may result in losses if the currency used
to hedge does not perform similarly to the currency in which the hedged
securities are denominated.
Under certain conditions, SEC guidelines require mutual funds to set aside
appropriate liquid assets in a segregated custodial account to cover
currency forward contracts. As required by SEC guidelines, the fund will
segregate assets to cover currency forward contracts, if any, whose purpose
is essentially speculative. The fund will not segregate assets to cover
forward contracts entered into for hedging purposes, including settlement
hedges, position hedges, and proxy hedges.
Successful use of forward currency contracts will depend on FMR's skill in
analyzing and predicting currency values. Forward contracts may
substantially change the fund's investment exposure to changes in currency
exchange rates, and could result in losses to the fund if currencies do not
perform as FMR anticipates. For example, if a currency's value rose at a
time when FMR had hedged the fund by selling that currency in exchange for
dollars, the fund would be unable to participate in the currency's
appreciation. If FMR hedges currency exposure through proxy hedges, the
fund could realize currency losses from the hedge and the security position
at the same time if the two currencies do not move in tandem. Similarly,
if FMR increases the fund's exposure to a foreign currency, and that
currency's value declines, the fund will realize a loss. There is no
assurance that FMR's use of forward currency contracts will be advantageous
to the fund or that it will hedge at an appropriate time. The policies
described in this section are non-fundamental policies of the fund.
LOWER-RATED DEBT SECURITIES. While the market for high-yield corporate
debt securities has been in existence for many years and has weathered
previous economic downturns, the 1980s brought a dramatic increase in the
use of such securities to fund highly leveraged corporate acquisitions and
restructurings. Past experience may not provide an accurate indication of
the future performance of the high-yield bond market, especially during
periods of economic recession. In fact, from 1989 to 1991, the percentage
of lower-rated debt securities that defaulted rose significantly above
prior levels , although the default rate decreased in 1992.
The market for lower-rated debt securities may be thinner and less active
than that for higher-rated debt securities, which can adversely affect the
prices at which the former are sold. If market quotations are not
available, lower-rated debt securities will be valued in accordance with
procedures established by the Board of Trustees, including the use of
outside pricing services. Judgment plays a greater role in valuing
high-yield corporate debt securities than is the case for securities for
which more external sources for quotations and last-sale information are
available. Adverse publicity and changing investor perceptions may affect
the ability of outside pricing services to value lower-rated debt
securities and the fund's ability to sell these securit ies.
Since the risk of default is higher for lower-rated debt securities, FMR's
research and credit analysis are an especially important part of managing
securities of this type held by the fund. In considering investments for
the fund, FMR will attempt to identify those issuers of high-yielding debt
securities whose financial condition is adequate to meet future
obligations, has improved, or is expected to improve in the future. FMR's
analysis focuses on relative values based on such factors as interest or
dividend coverage, asset coverage, earnings prospects, and the experience
and managerial strength of the issuer.
The fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise to exercise its rights as a security holder
to seek to protect the interests of security holders if it determines this
to be in the best interest of the fund's shareholders.
SHORT SALES "AGAINST THE BOX". If the fund enters into a short sale
against the box, it will be required to set aside securities equivalent in
kind and amount to the securities sold short (or securities convertible or
exchangeable into such securities) and will be required to hold such
securities while the short sale is outstanding. The fund will incur
transaction costs, including interest expense, in connection with opening,
maintaining, and closing short sales against the box.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The fund has filed a
notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading Commission
(CFTC) and the National Futures Association, which regulate trading in the
futures markets. The fund intends to comply with Section 4.5 of the
regulations under the Commodity Exchange Act, which limits the extent to
which the fund can commit assets to initial margin deposits and option
premiums.
In addition, the fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the fund would
exceed 5% of the fund's total assets. These limitations do not apply to
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on the fund's investments in futures contracts and
options, and the fund's policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information, are not
fundamental policies and may be changed as regulatory agencies permit.
FUTURES CONTRACTS. When the fund purchases a futures contract, it agrees
to purchase a specified underlying instrument at a specified future date.
When the fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when the fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Standard & Poor's 500 Composite Stock
Price Index (S&P 500). Futures can be held until their delivery
dates, or can be closed out before then if a liquid secondary market is
available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase the fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When the fund sells a
futures contract, by contrast, the value of its futures position will tend
to move in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of the fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of the fund, the fund may
be entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the fund
pays the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. The fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the fund will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. The fund may also terminate a put option position by closing it out
in the secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When the fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the fund assumes the obligation to pay
the strike price for the option's underlying instrument if the other party
to the option chooses to exercise it. When writing an option on a futures
contract , the fund will be required to make margin payments to an
FCM as described above for futures contracts. The fund may seek to
terminate its position in a put option it writes before exercise by closing
out the option in the secondary market at its current price. If the
secondary market is not liquid for a put option the fund has written,
however, the fund must continue to be prepared to pay the strike price
while the option is outstanding, regardless of price changes, and must
continue to set aside assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates the fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those
of writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
COMBINED POSITIONS. The fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, the fund may purchase a put option and write a call option on the
same underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple
trades, they result in higher transaction costs and may be more difficult
to open and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the fund's current or
anticipated investments exactly. The fund may invest in options and
futures contracts based on securities with different issuers, maturities,
or other characteristics from the securities in which it typically invests,
which involves a risk that the options or futures position will not track
the performance of the fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other
investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for the fund
to enter into new positions or close out existing positions. If the
secondary market for a contract is not liquid because of price fluctuation
limits or otherwise, it could prevent prompt liquidation of unfavorable
positions, and potentially could require the fund to continue to hold a
position until delivery or expiration regardless of changes in its value.
As a result, the fund's access to other assets held to cover its options or
futures positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter options (options not traded on
exchanges) generally are established through negotiation with the other
party to the option contract. While this type of arrangement allows the
fund greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except that
they are traded on exchanges (and have margin requirements) and are
standardized as to contract size and delivery date. Most currency futures
contracts call for payment or delivery in U.S. dollars. The underlying
instrument of a currency option may be a foreign currency, which generally
is purchased or delivered in exchange for U.S. dollars, or may be a futures
contract. The purchaser of a currency call obtains the right to purchase
the underlying currency, and the purchaser of a currency put obtains the
right to sell the underlying currency.
The uses and risks of currency options and futures are similar to options
and futures relating to securities or indices, as discussed above. The
fund may purchase and sell currency futures and may purchase and write
currency options to increase or decrease its exposure to different foreign
currencies. The fund may also purchase and write currency options in
conjunction with each other or with currency futures or forward contracts.
Currency futures and options values can be expected to correlate with
exchange rates, but may not reflect other factors that affect the value of
the fund's investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not protect
the fund against a price decline resulting from deterioration in the
issuer's creditworthiness. Because the value of the fund's
foreign-denominated investments changes in response to many factors other
than exchange rates, it may not be possible to match the amount of currency
options and futures to the value of the fund's investments exactly over
time.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The fund will comply
with guidelines established by the SEC with respect to coverage of options
and futures strategies by mutual funds, and if the guidelines so require
will set aside appropriate liquid assets in a segregated custodial account
in the amount prescribed. Securities held in a segregated account cannot
be sold while the futures or option strategy is outstanding, unless they
are replaced with other suitable assets. As a result, there is a
possibility that segregation of a large percentage of the fund's assets
could impede portfolio management or the fund's ability to meet redemption
requests or other current obligations.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of the fund by FMR pursuant to authority contained in the management
contract. FMR is also responsible for the placement of transaction orders
for other investment companies and accounts for which it or its affiliates
act as investment adviser. In selecting broker-dealers, subject to
applicable limitations of the federal securities laws, FMR considers
various relevant factors, including, but not limited to, the size and type
of the transaction; the nature and character of the markets for the
security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; and the
reasonableness of any commissions ; and arrangements for payment of fund
expenses. Commissions for foreign investments traded on foreign
exchanges will generally be higher than for U.S. investments and may not be
subject to negotiation.
The fund may execute portfolio transactions with broker-dealers who provide
research and execution services to the fund or other accounts over which
FMR or its affiliates exercise investment discretion. Such services may
include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). The selection of such broker-dealers is
generally made by FMR (to the extent possible consistent with execution
considerations) in accordance with a ranking of broker-dealers determined
periodically by FMR's investment staff based upon the quality of research
and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the fund may be useful to FMR in rendering investment management
services to the fund or its other clients, and conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the fund. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid the
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause
the fund to pay such higher commissions, FMR must determine in good faith
that such commissions are reasonable in relation to the value of the
brokerage and research services provided by such executing broker-dealers,
viewed in terms of a particular transaction or FMR's overall
responsibilities to the fund and its other clients. In reaching this
determination, FMR will not attempt to place a specific dollar value on the
brokerage and research services provided, or to determine what portion of
the compensation should be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the fund or shares of other Fidelity funds
to the extent permitted by law. FMR may use research services provided by
and place agency transactions with Fidelity Brokerage Services, Inc. (FBSI)
and Fidelity Brokerage Services Ltd. (FBSL), subsidiaries of FMR Corp., if
the commissions are fair, reasonable, and comparable to commissions charged
by non-affiliated, qualified brokerage firms for similar services. Prior
to September 4, 1992, FBSL operated under the name Fidelity Portfolio
Services, Ltd. (FPSL) as a wholly owned subsidiary of Fidelity
International Limited (FIL). Edward C. Johnson 3d is Chairman of FIL. Mr.
Johnson 3d, Johnson family members , and various trusts for the
benefit of the Johnson family , own , directly or
indirectly , more than 25% of the voting common stock of FIL.
FMR may allocate brokerage transactions to broker-dealers who have
entered into arrangements with FMR under which the broker-dealer allocates
a portion of the commissions paid by the fund toward payment of the fund's
expenses, such as transfer agent fees of FSC or custodian fees. The
transaction quality must, however, be comparable to those of other
qualified broker-dealers.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, except if certain
requirements are satisfied . Pursuant to such requirements, the
Board of Trustees has authorized FBSI to execute fund
portfolio transactions on national securities exchanges in accordance
with approved procedures and applicable SEC rules.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
fund and review the commissions paid by the fund over representative
periods of time to determine if they are reasonable in relation to the
benefits to the fund.
For the fiscal years ended March 31, 199 4 and 199 3 , the
fund's annual portfolio turnover rates were _ % and 155 %,
respectively.
For the fiscal years ended March 31, 199 4 , 199 3 , and
199 2 , the fund paid brokerage commissions of $_________,
$ 62,757,285 and $55,087,234, respectively. During fiscal 1993,
$36,073,117 or approximately 57% of these commissions were paid to
brokerage firms that provided research services, although the provision of
such services was not necessarily a factor in the placement of all of this
business with such firms. The fund pays both commissions and spreads in
connection with the placement of portfolio transactions; FBSI is paid on a
commission basis. During fiscal 199 4 , 199 3 , and 199 2 ,
the fund paid brokerage commissions of $______, $20,714,134
and , $19,776,163, respectively, to FBSI. During fiscal
199 4 , this amounted to __ % of the aggregate brokerage
commissions paid by the fund for transactions involving 44% of the
aggregate dollar amount of transactions in which the fund paid brokerage
commissions. The difference in the percentage of brokerage commissions
paid to and the percentage of the dollar amount of transactions effected
through FBSI is a result of the low commission rates charged by FBSI.
During fiscal 199 4 , 199 3 , and 199 2 , the fund paid
brokerage commissions of $_____, $38,938, and $114,458,
respectively, to FBS I . During fiscal 199 4 , this amounted to
approximately __ % of the aggregate brokerage commissions paid by the
fund, for transactions involving approximately __ % of the aggregate
dollar amount of transactions in which the fund paid brokerage commissions.
From time to time the Trustees will review whether the recapture for the
benefit of the fund of some portion of the brokerage commissions or similar
fees paid by the fund on portfolio transactions is legally permissible and
advisable. The fund seeks to recapture soliciting broker-dealer fees on the
tender of portfolio securities, but at present no other recapture
arrangements are in effect. The Trustees intend to continue to review
whether recapture opportunities are available and are legally permissible
and, if so, to determine, in the exercise of their business judgment,
whether it would be advisable for the fund to seek such recapture.
Although the Trustees and officers of the fund are substantially the same
as those of other funds managed by FMR, investment decisions for the fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds are managed by
the same investment adviser, particularly when the same security is
suitable for the investment objective of more than one fund or
account.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with a formula considered by the officers of the funds involved to be
equitable to each fund. In some cases this system could have a detrimental
effect on the price or value of the security as far as the fund is
concerned. In other cases, however, the ability of the fund to participate
in volume transactions will produce better executions and prices for the
fund. It is the current opinion of the Trustees that the desirability of
retaining FMR as investment adviser to the fund outweighs any disadvantages
that may be said to exist from exposure to simultaneous transactions.
VALUATION OF PORTFOLIO SECURITIES
Portfolio securities are valued by various methods depending on the
primary market or exchange on which they trade. Equity securities for
which the primary market is the U.S. are valued at last sale price or, if
no sale has occurred, at the closing bid price. Equity securities for
which the primary market is outside the U.S. are valued at last sale price
or, if no sale has occurred, at the closing bid price. Equity securities
for which the primary market is outside the U.S. are valued using the
official closing price or the last sale price in the principal market where
they are traded. If the last sale price (on the local exchange) is
unavailable, the last evaluated quote or last bid price is normally used.
Short-term securities are valued either at amortized cost or at original
cost plus accrued interest, both of which approximate current value.
Fixed-income securities are valued primarily by a pricing service that uses
a vendor security valuation matrix which incorporates both dealer-supplied
valuations and electronic data processing techniques. This two fold
approach is believed to more accurately reflect fair value because it takes
into account appropriate factors such as institutional trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics, and other market data, without exclusive reliance
upon quoted, exchange, or over-the-counter prices. Use of pricing services
has been approved by the Board of Trustees.
Securities and other assets for which there is no readily available
market are valued in good faith by a committee appointed by the Board of
Trustees. The procedures set forth above need not be used to determine the
value of the securities owned by the fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method (e.g., closing
over-the-counter bid prices in the case of debt instruments traded on an
exchange) would more accurately reflect the fair market value of such
securities.
Generally, the valuation of foreign and domestic equity securities, as
well as corporate bond, U.S. government securities, money market
instruments, and repurchase agreements, is substantially completed each day
at the close of the NYSE. The values of any such securities held by the
fund are determined as of such time for the purpose of computing the fund's
net asset value. Foreign security prices are furnished by independent
brokers or quotation services which express the value of securities in
their local currency. FSC gathers all exchange rates daily at the close of
the NYSE using the last quoted price on the local currency and then
translates the value of foreign securities from their local currency into
U.S. dollars. Any changes in the value of forward contracts due to
exchange rate fluctuations and days to maturity are included in the
calculation of net asset value. If an extraordinary event that is expected
to materially affect the value of a portfolio security occurs after the
close of an exchange on which that security is traded, then the security
will be valued as determined in good faith by a committee appointed by the
Board of Trustees.
PERFORMANCE
The fund may quote its performance in various ways. All performance
information supplied by the fund in advertising is historical and is not
intended to indicate future returns. The fund's share price and total
returns fluctuate in response to market conditions and other factors, and
the value of fund shares when redeemed may be more or less than their
original cost.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of the fund's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in the fund's net asset
value per share (NAV) over the period. Average annual returns are
calculated by determining the growth or decline in value of a hypothetical
historical investment in the fund over a stated period, and then
calculating the annually compounded percentage rate that would have
produced the same result if the rate of growth or decline in value had been
constant over the period. For example, a cumulative return of 100% over
ten years would produce an average annual return of 7.18%, which is the
steady annual rate of return that would equal 100% growth on a compounded
basis in ten years. While average annual returns are a convenient means of
comparing investment alternatives, investors should realize that the fund's
performance is not constant over time, but changes from year to year, and
that average annual returns represent averaged figures as opposed to the
actual year-to-year performance of the fund.
In addition to average annual returns, the fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. An example of this type of
illustration is given below. Total returns may be quoted on a before-tax
or after-tax basis, and may or may not take the fund's 3% sales charge into
account. Excluding the fund's sales charge from a total return calculation
produces a higher total return figure. Total returns and other performance
information may be quoted numerically or in a table, graph, or similar
illustration.
NET ASSET VALUE. Charts and graphs using the fund's net asset values,
adjusted net asset values, and benchmark indices may be used to exhibit
performance. An adjusted NAV includes any distributions paid by the fund
and reflects all elements of its return. Unless otherwise indicated, the
fund's adjusted NAVs are not adjusted for sales charges, if any.
MOVING AVERAGES. The fund may illustrate performance using moving
averages. A long-term moving average is the average of each week's
adjusted closing NAV for a specified period. A short-term moving average
is the average of each day's adjusted closing NAV for a specified period.
Moving Average Activity Indicators combine adjusted closing NAVs from the
last business day of each week with moving averages for a specified period
to produce indicators showing when an NAV has crossed, stayed above, or
stayed below its moving average. On __________ , the 13-week and
39-week long-term moving averages were ____ and ____ ,
respectively.
HISTORICAL FUND RESULTS. The following table shows the income and capital
elements of the fund's cumulative total return for the ten years ended
March 31, 199 4 . The table compares the fund's return to the record
of the Standard & Poor's 500 Composite Stock Price Index (S&P 500),
the Dow Jones Industrial Average (DJIA), and the cost of living (measured
by the Consumer Price Index or CPI) over the same period. The S&P 500
and DJIA comparisons are provided to show how the fund's total return
compared to the record of a broad average of common stock prices and a
narrower set of stocks of major industrial companies, respectively, over
the same period. The fund has the ability to invest in securities not
included in either index, and its portfolio may or may not be similar in
composition to the indices. The S&P 500 and DJIA are based on the
prices of unmanaged groups of stocks and, unlike the fund's returns, their
returns do not include the effect of paying brokerage commissions and other
costs of investing.
During the period from March 31, 198 4 through March 31, 199 4,
a hypothetical $10,000 investment in Fidelity Magellan Fund would have
grown to $52,796, after deducting the fund's 3% sales charge and assuming
all distributions were reinvested. This was a period of widely fluctuating
stock prices and should not be considered representative of the dividend
income or capital gain or loss that could be realized from an investment in
the fund today.
FIDELITY MAGELLAN FUND INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of Value of
Initial Reinvested Reinvested Cost
Year Ended $10,000 Dividend Capital Gain Total of
March 31 Investment Distributions Distributions Value S&P 500 DJIA Living
1994 $______ $_____ $______ $_____ $_____ $_____ $_____
1993 _______ _____ ______ _____ _____ _____ _____
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1992 _______ _____ ______ _____ _____ _____ _____
1991 _______ _____ ______ _____ _____ _____ _____
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1990 _______ _____ ______ _____ _____ _____ _____
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1989 _______ _____ ______ _____ _____ _____ _____
1988 _______ _____ ______ _____ _____ _____ _____
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1987 _______ _____ ______ _____ _____ _____ _____
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1986 _______ _____ ______ _____ _____ _____ _____
1985 _______ _____ ______ _____ _____ _____ _____
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1984 _______ _____ ______ _____ _____ _____ _____
</TABLE>
Explanatory Notes: With an initial investment of $10,000 made on March 31,
198 4 , the net amount invested in fund shares was $9,700 (assuming
the fund's current 3% sales charge had been in effect at that time). The
cost of the initial investment ($10,000), together with the aggregate cost
of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested), amounted to
$ ______ . If distributions had not been reinvested, the amount of
distributions earned from the fund over time would have been smaller, and
the cash payments for the period would have come to $ _____ for
income dividends and $12,376 for capital gain distributions. Tax
consequences of different investments have not been factored into the above
figures.
The Lipper performance analysis ranks funds on the basis of total
return, assuming reinvestment of distributions, but does not take sales
charges or redemption fees into consideration and is prepared without
regard to tax consequences.
The Lipper General Equity Funds Average can be used to show how the fund's
performance compared to a broad-based set of domestic equity mutual funds.
The Lipper General Equity Funds Average is an average of the total returns
of all equity mutual funds (excluding international funds and funds that
specialize in particular industries or types of investments) tracked by
Lipper. As of March 31, 1993, the average included 38 capital appreciation
funds, 395 growth funds, 166 small company growth funds, 302 growth and
income funds, and 84 equity-income funds.
Capital appreciation, growth, and small company growth funds usually invest
principally in common stock with long-term growth as a primary goal.
Growth and income and equity-income funds tend to be more conservative in
nature and usually invest in a combination of common stocks, bonds,
preferred stocks, and other income-producing securities. Growth and income
and equity-income funds generally seek to provide their shareholders with
current income as well as growth of capital, unlike growth funds, which may
or may not produce income. For the twenty-, fifteen-, ten-, five-, and
one-year periods ending March 31, 1993, the Lipper General Equity Funds
Average had cumulative total returns of approximately 970.76%, 779.57%,
227.78%, 84.09%, and 12.31%, respectively.
The fund's performance may be compared to the performance of other
mutual funds in general, or to the performance of particular types of
mutual funds. These comparisons may be expressed as mutual fund rankings
prepared by Lipper Analytical Services, Inc. (Lipper), an independent
service located in Summit, New Jersey that monitors the performance of
mutual funds.
The fund's one-,five-, ten-, fifteen, twenty-, and twenty-five year
performance rankings among all mutual funds included in the survey
(excluding money market funds and municipal bond funds regardless of
investment objective) for the periods ended _____ were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1 Year 5 Years 10 Years 15 Years 20 Years 25 Years
__ out of __ __ out of __ __ out of __ __ out of __ __ out of __ __ out of __
</TABLE>
Lipper generally ranks funds on the basis of total return, assuming
reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. In addition to the mutual fund rankings, the fund's
performance may be compared to mutual fund performance indices prepared by
Lipper.
From time to time, the fund's performance may also be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, the fund may quote Morningstar, Inc. in its advertising
materials. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in
advertising.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. For
example, Fidelity's FundMatchsm Program includes a workbook describing
general principles of investing, such as asset allocation, diversification,
risk tolerance, and goal setting; a questionnaire designed to help create a
personal financial profile; and an action plan offering investment
alternatives. Materials may also include discussions of Fidelity's three
asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order
to demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college; charitable
giving; and the Fidelity credit card. In addition, Fidelity may quote
financial or business publications and periodicals, including model
portfolios or allocations, as they relate to fund management, investment
philosophy, and investment techniques. Fidelity may also reprint, and use
as advertising and sales literature, articles from Fidelity Focus, a
quarterly magazine provided free of charge to Fidelity fund shareholders.
The fund may present its fund number, Quotron(trademark) number, and
CUSIP number, and discuss or quote its current portfolio manager.
VOLATILITY. The fund may quote various measures of volatility and
benchmark correlation in advertising. In addition, the fund may compare
these measures to those of other funds. Measures of volatility seek to
compare the fund's historical share price fluctuations or total returns to
those of a benchmark. Measures of benchmark correlation indicate how valid
a comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data.
MOMENTUM INDICATORS indicate the fund's price movements over specific
periods of time. Each point on the momentum indicator represents the
fund's percentage change in price movements over that period.
The fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a
program, an investor invests a fixed dollar amount in a fund at periodic
intervals, thereby purchasing fewer shares when prices are high and more
shares when prices are low. While such a strategy does not assure a profit
or guard against loss in a declining market, the investor's average cost
per share can be lower than if fixed numbers of shares are purchased at the
same intervals. In evaluating such a plan, investors should consider their
ability to continue purchasing shares during periods of low price
levels.
The fund may be available for purchase through retirement plans or other
programs offering deferral of, or exemption from, income taxes, which may
produce superior after-tax returns over time. For example, a $1,000
investment earning a taxable return of 10% annually would have an after-tax
value of $1,949 after ten years, assuming tax was deducted from the return
each year at a 31% rate. An equivalent tax-deferred investment would have
an after-tax value of $2,100 after ten years, assuming tax was deducted at
a 31% rate from the tax-deferred earnings at the end of the ten-year
period.
As of March 31, 1994, FMR managed approximately $__ billion in equity
fund assets with over ____ million shareholders as defined and tracked by
Lipper. This figure represents the largest amount of equity fund assets
under management by a mutual fund investment adviser in the United States,
making FMR America's leading equity (stock) fund manager. As of March 31,
1994, Fidelity Magellan Fund had approximately $__ billion in assets with
over __ million shareholders as defined and tracked by Lipper. This figure
represents the largest amount of equity fund assets under management by a
mutual fund, making Magellan America's largest equity fund. From time to
time, the fund may use any of the above information in its advertising and
sales literature.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
As provided for in Rule 22d-1 under the Investment Company Act of 1940 (the
1940 Act), FDC exercises its right to waive the fund's 3% sales charge on
shares acquired through reinvestment of dividends and capital gain
distributions or in connection with the fund's merger with or acquisition
of any investment company or trust.
In addition, the fund's sales charge will not apply (1) if you buy shares
as part of an employee benefit plan (including the Fidelity-sponsored
403(b) and corporate IRA programs but otherwise as defined in the Employee
Retirement Income Security Act) maintained by a U.S. employer and having
more than 200 eligible employees, or a minimum of $3,000,000 in plan assets
invested in Fidelity mutual funds, or as part of an employee benefit plan
maintained by a U.S. employer that is a member of a parent-subsidiary group
of corporations (within the meaning of Section 1563(a)(1) of the Internal
Revenue Code, with "50%" substituted for "80%") any member of which
maintains an employee benefit plan having more than 200 eligible employees,
or a minimum of $3,000,000 in plan assets invested in Fidelity mutual
funds, or as part of an employee benefit plan maintained by a non-U.S.
employer having 200 or more eligible employees, or a minimum of $3,000,000
in plan assets invested in Fidelity mutual funds, the assets of which are
held in a bona fide trust for the exclusive benefit of employees
participating therein; (2) to shares purchased by an insurance company
separate account used to fund annuity contracts purchased by employee
benefit plans (including 403(b) programs, but otherwise as defined in the
Employee Retirement Income Security Act), which, in the aggregate, have
either more than 200 eligible employees or a minimum of $3,000,000 in
assets invested in Fidelity funds; (3) to shares in a Fidelity IRA account
purchased (including purchases by exchange) with the proceeds of a
distribution from an employee benefit plan provided that: (i) at the time
of the distribution, the employer, or an affiliate (as described in
exemption (1) above) of such employer, maintained at least one employee
benefit plan that qualified for exemption (1) and that had at least some
portion of its assets invested in one or more mutual funds advised by FMR,
or in one or more accounts or pools advised by Fidelity Management Trust
Company; and (ii) the distribution is transferred from the plan to a
Fidelity Rollover IRA account within 60 days from the date of the
distribution; (4) if you are a charitable organization (as defined in
Section 501(c)(3) of the Internal Revenue Code) investing $100,000 or more;
(5) if you purchase shares for a charitable remainder trust or life income
pool established for the benefit of a charitable organization (as defined
by Section 501(c)(3) of the Internal Revenue Code); (6) if you are an
investor participating in the Fidelity Trust Portfolios program (these
investors must make initial investments of $100,000 or more in Trust
Portfolios funds and must, during the initial six-month period, reach and
maintain an aggregate balance of at least $500,000 in all accounts and
subaccounts purchased through the Trust Portfolios program); (7) to shares
purchased through Portfolio Advisory Services; (8) if you are a current or
former Trustee or officer of a Fidelity fund or a current or retired
officer, director, or full-time employee of FMR Corp. or its direct or
indirect subsidiaries (a Fidelity Trustee or employee), the spouse of a
Fidelity Trustee or employee, a Fidelity Trustee or employee acting as
custodian for a minor child, or a person acting as trustee of a trust for
the sole benefit of the minor child of a Fidelity Trustee or employee; or
(9) if you are a bank trust officer, registered representative, or other
employee of a Qualified Recipient. Qualified Recipients are securities
dealers or other entities, including banks and other financial
institutions, who have sold the fund's shares under special arrangements in
connection with FDC's sales activities. FDC has chosen to waive the fund's
sales charge in these instances because of efficiencies involved in sales
of shares to these investors.
The fund's sales charge may be reduced to reflect sales charges
previously paid,or that would have been paid absent a reduction as noted in
the prospectus, in connection with investments in other Fidelity funds.
This includes reductions for investments in the following prototype-like
retirement plans sponsored by FMR or FMR Corp.: The Fidelity IRA, The
Fidelity Rollover IRA, The Fidelity SEP-IRA and SARSEP, The Fidelity
Retirement Plan, Fidelity Defined Benefit Plan, The Fidelity Group IRA, The
Fidelity 403(b) Program, The Fidelity Investments 401(a) Prototype Plan for
Tax-Exempt Employers, and The CORPORATEplan for Retirement (Profit Sharing
and Money Purchase Plan).
The fund is open for business and its net asset value per share (NAV) is
calculated each day the New York Stock Exchange (NYSE) is open for trading.
The NYSE has designated the following holiday closings for 199 4 :
Washington's Birthday (observed), Good Friday, Memorial Day (observed),
Independence Day (observed), Labor Day, Thanksgiving Day, and Christmas Day
(observed). Although FMR expects the same holiday schedule , with
addition of New Year's Day, to be observed in the future, the NYSE may
modify its holiday schedule at any time.
FSC normally determines the fund's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier
if trading on the NYSE is restricted or as permitted by the SEC. To the
extent that portfolio securities are traded in other markets on days when
the NYSE is closed, the fund's NAV may be affected on days when investors
do not have access to the fund to purchase or redeem shares.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing the fund's NAV. Shareholders receiving securities or other
property on redemption may realize a gain or loss for tax purposes, and
will incur any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act, the fund is required to give
shareholders at least 60 days' notice prior to terminating or modifying its
exchange privilege. Under the Rule, the 60-day notification requirement
may be waived if (i) the only effect of a modification would be to reduce
or eliminate an administrative fee, redemption fee, or deferred sales
charge ordinarily payable at the time of exchange, or (ii) the fund
suspends the redemption of shares to be exchanged as permitted under the
1940 Act o r the rules and regulations thereunder , or the fund to be
acquired suspends the sale of its shares because it is unable to invest
amounts effectively in accordance with its investment objective and
policies.
In the Prospectus, the fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at
the then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. A portion of the fund's income may qualify for the
dividends-received deduction available to corporate shareholders to the
extent that the fund's income is derived from qualifying dividends.
Because the fund may earn other types of income, such as interest income
from securities loans, non-qualifying dividends, and short-term capital
gains, the percentage of dividends from the fund that qualify for the
deduction generally will be less than 100%. The fund will notify corporate
shareholders annually of the percentage of fund dividends that qualifies
for the dividends-received deduction. A portion of the fund's dividends
derived from certain U.S. government obligations may be exempt from state
and local taxation. Gains (losses) attributable to foreign currency
fluctuations are generally taxable as ordinary income, and therefore will
increase (decrease) dividend distributions. The fund will send each
shareholder a notice in January describing the tax status of dividends and
capital gain distributions for the prior year.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the fund on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains, regardless of the length of time
shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of the fund and such shares are held
six months or less and are sold at a loss, the portion of the loss equal to
the amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes.
Short-term capital gains distributed by the fund are taxable to
shareholders as dividends, not as capital gains. Distributions from
short-term capital gains do not qualify for the dividends-received
deduction.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Because the fund does
not currently anticipate that securities of foreign issuers will constitute
more than 50% of its total assets at the end of its fiscal year,
shareholders should not expect to claim a foreign tax credit or deduction
on their federal income tax returns with respect to foreign taxes withheld.
TAX STATUS OF THE FUND. The fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes at the fund level,
the fund intends to distribute substantially all of its net investment
income and net realized capital gains within each calendar year as well as
on a fiscal year basis. The fund intends to comply with other tax rules
applicable to regulated investment companies, including a requirement that
capital gains from the sale of securities held less than three months
constitute less than 30% of the fund's gross income for each fiscal year.
Gains from some forward currency contracts, futures contracts, and options
are included in this 30% calculation, which may limit the fund's
investments in such instruments.
If the fund purchases shares in certain foreign investment entities,
defined as passive foreign investment companies (PFIC's) in the Internal
Revenue Code, it may be subject to U.S. federal income tax on a portion of
any excess distribution or gain from the disposition of such shares.
Interest charges may also be imposed on the fund with respect to deferred
taxes arising from such distributions or gains.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting the fund and its shareholders, and
no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders may be subject to state and
local taxes on distributions received from the fund. Investors should
consult their tax advisers to determine whether the fund is suitable to
their particular situation.
FMR
FMR is a wholly owned subsidiary of FMR Corp., a parent company organized
in 1972. At present, the principal operating activities of FMR Corp. are
those conducted by three of its divisions as follows: FSC, which is the
transfer and shareholder servicing agent for certain of the funds advised
by FMR; Fidelity Investments Institutional Operations Company, which
performs shareholder servicing functions for certain institutional
customers; and Fidelity Investments Retail Marketing Company, which
provides marketing services to various companies within the Fidelity
organization.
Several affiliates of FMR are also engaged in the investment advisory
business. Fidelity Management Trust Company provides trustee, investment
advisory, and administrative services to retirement plans and corporate
employee benefit accounts. FMR U.K. and FMR Far East, both wholly owned
subsidiaries of FMR formed in 1986, supply investment research, and may
supply portfolio management services, to FMR in connection with certain
funds advised by FMR. Analysts employed by FMR, FMR U.K., and FMR Far East
research and visit thousands of domestic and foreign companies each year.
FMR Texas Inc., a wholly owned subsidiary of FMR formed in 1989, supplies
portfolio management and research services in connection with certain money
market funds advised by FMR.
TRUSTEES AND OFFICERS
The fund's Trustees and executive officers are listed below. Except as
indicated, each individual has held the office shown or other offices in
the same company for the last five years. All persons named as Trustees
also serve in similar capacities for other funds advised by FMR. Unless
otherwise noted, the business address of each Trustee and officer is 82
Devonshire Street, Boston, Massachusetts 02109, which is also the address
of FMR. Those Trustees who are "interested persons" (as defined in the
Investment Company Act of 1940) by virtue of their affiliation with either
the fund or FMR are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d, Trustee and President, is Chairman, Chief Executive
Officer and a Director of FMR Corp.; a Director and Chairman of the Board
and of the Executive Committee of FMR; Chairman and a Director of FMR Texas
Inc. (1989), Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR;
and President and a Director of FMR Texas Inc. (1989), Fidelity Management
& Research (U.K.) Inc. , and Fidelity Management & Research
(Far East) Inc.
RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is
President of Greenhill Petroleum Corporation (petroleum exploration and
production, 1990). Prior to his retirement in March 1990, Mr. Cox was
President and Chief Operating Officer of Union Pacific Resources Company
(exploration and production). He is a Director of Bonneville Pacific
Corporation (independent power, 1989) and CH2M Hill Companies
(engineering). In addition, he served on the Board of Directors of the
Norton Company (manufacturer of industrial devices, 1983-1990) and
continues to serve on the Board of Directors of the Texas State Chamber of
Commerce, and is a member of advisory boards of Texas A&M University
and the University of Texas at Austin.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls , OH, Trustee
(1990). Prior to his retirement in 1984, Mr. Jones was Chairman and Chief
Executive Officer of LTV Steel Company. Prior to May 1990, he was Director
of National City Corporation (a bank holding company) and National City
Bank of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporation, Hyster-Yale Materials Handling, Inc. (1989), and RPM,
Inc. (manufacturer of chemical products, 1990). In addition, he serves as
a Trustee of First Union Real Estate Investments; Chairman of the Board of
Trustees and a member of the Executive Committee of the Cleveland Clinic
Foundation, a Trustee and a member of the Executive Committee of University
School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, 680 Steamboat Road, Apartment #1 - North, Greenwich,
CT, Trustee, is a Professor at Columbia University Graduate School of
Business and a financial consultant. Prior to 1987, he was Chairman of the
Financial Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance), and Valuation Research Corp. (appraisals and
valuations, 1993). In addition, he serves as Vice Chairman of the Board of
Directors of the National Arts Stabilization Fund, and Vice Chairman
of the Board of Trustees of the Greenwich Hospital Association .
*PETER S. LYNCH, Trustee (1990) is Vice Chairman of FMR (1992). Prior to
his retirement on May 31, 1990, he was a Director of FMR (1989) and
Executive Vice President of FMR (a position he held until March 31, 1991);
Vice President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). He is a Director of
W.R. Grace & Co. (chemicals, 1989) and Morrison Knudsen Corporation
(engineering and construction). In addition, he serves as a Trustee of
Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield
(1989) and Society for the Preservation of New England Antiquities, and as
an Overseer of the Museum of Fine Arts of Boston (1990).
GERALD C. McDONOUGH, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989), is
Chairman of G.M. Management Group (strategic advisory services). Prior to
his retirement in July 1988, he was Chairman and Chief Executive Officer of
Leaseway Transportation Corp. (physical distribution services). Mr.
McDonough is a Director of ACME-Cleveland Corp. (metal working,
telecommunications and electronic products), Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and refrigeration,
1989), and Commercial Intertech Corp. (water treatment equipment, 1992) ,
and Associated Estates Realty Corporation (a real estate investment trust,
1993).
EDWARD H. MALONE, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee (1988).
Prior to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company.
He is a Director of Allegheny Power Systems, Inc. (electric utility),
General Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer).
He is also a Trustee of Rensselaer Polytechnic Institute and of Corporate
Property Investors and a member of the Advisory Boards of Butler Capital
Corporation Funds and Warburg, Pincus Partnership Funds.
THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
Trustee (1988), is President of The Wales Group, Inc. (management and
financial advisory services). Prior to retiring in 1987, Mr. Williams
served as Chairman of the Board of First Wachovia Corporation (bank holding
company), and Chairman and Chief Executive Officer of The First National
Bank of Atlanta and First Atlanta Corporation (bank holding company). He
is currently a Director of BellSouth Corporation (telecommunications),
ConAgra, Inc. (agricultural products), Fisher Business Systems, Inc.
(computer software, 1988), Georgia Power Company (electric utility), Gerber
Alley & Associates, Inc. (computer software), National Life Insurance
Company of Vermont, American Software, Inc. (1989), and AppleSouth, Inc.
(restaurants, 1992).
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the
Fidelity funds, Mr. French was Senior Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1991); Vice President, Fund
Accounting - Fidelity Accounting & Custody Services Co. (1990); and
Senior Vice President, Chief Financial and Operations Officer - Huntington
Advisers, Inc. (1985-1990).
JEFFREY VINIK, Vice President of the fund (1992), is a Vice President of
FMR.
ARTHUR S. LORING, Secretary, is Senior Vice President and General
Counsel of FMR, Vice President-Legal of FMR Corp., and Clerk of FDC.
ROBERT H. MORRISON, Manager, Security Transactions, is an employee of FMR.
Under a retirement program that became effective on November 1, 1989,
Trustees, upon reaching age 72, become eligible to participate in a defined
benefit retirement program under which they receive payments during their
lifetime from the fund based on their final year's basic trustee fees and
length of service. Currently, Messrs. Robert L. Johnson, William R.
Spaulding, Bertram H. Witham and David L. Yunich participate in the
program.
On March 31, 199 4 , the Trustees and officers owned in the aggregate
less than _ % of the fund's outstanding shares.
MANAGEMENT CONTRACT
The fund employs FMR to furnish investment advisory and other services.
Under FMR's management contract with the fund, FMR acts as investment
adviser and, subject to the supervision of the Board of Trustees, directs
the investments of the fund in accordance with its investment objective,
policies, and limitations. FMR also provides the fund with all necessary
office facilities and personnel for servicing the fund's investments, and
compensates all officers of the fund, all Trustees who are "interested
persons" of the fund or FMR, and all personnel of the fund or of FMR
performing services relating to research, statistical, and investment
activities.
In addition, FMR or its affiliates, subject to the supervision of the Board
of Trustees, provide the management and administrative services necessary
for the operation of the fund. These services include providing facilities
for maintaining the fund's organization; supervising relations with
custodians, transfer and pricing agents, accountants, underwriters, and
other persons dealing with the fund; preparing all general shareholder
communications and conducting shareholder relations; maintaining the fund's
records and the registration of the fund's shares under federal and state
law; developing management and shareholder services for the fund; and
furnishing reports, evaluations, and analyses on a variety of subjects to
the Board of Trustees.
In addition to the management fee payable to FMR and the fees payable to
FSC, the fund pays all of its expenses, without limitation, that are not
assumed by those parties. The fund pays for typesetting, printing, and
mailing proxy materials to shareholders, legal expenses, and the fees of
the custodian, auditor, and non-interested Trustees. Although the fund's
management contract provides that the fund will pay for typesetting,
printing, and mailing prospectuses, statements of additional information,
notices, and reports to existing shareholders, the fund has entered into a
revised transfer agent agreement with FSC, pursuant to which FSC bears the
cost of providing these services to existing shareholders. Other expenses
paid by the fund include interest, taxes, brokerage commissions, the fund's
proportionate share of insurance premiums and Investment Company Institute
dues, and the costs of registering shares under federal and state
securities laws. The fund is also liable for such non-recurring expenses
as may arise, including costs of any litigation to which the fund may be a
party and any obligation it may have to indemnify the fund's
officers and Trustees with respect to litigation.
FMR is the fund's manager pursuant to a management contract dated April
1, 1994 , which was approved by shareholders on March 23, 1994 .
For the services of FMR under the contract, the fund pays a monthly
management fee composed of the sum of two elements: a basic fee and a
performance adjustment based on a comparison of the fund's performance to
that of the Standard & Poor's 500 Composite Stock Price Index (S&P
500).
COMPUTING THE BASIC FEE. The fund's basic fee rate is composed of two
elements: a group fee rate and individual fund fee rate. The group fee
rate is based on the monthly average net assets of all of the registered
investment companies with which FMR has management contracts and is
calculated on a cumulative basis pursuant to the graduated fee rate
schedule shown on the left. On the right, the effective fee rate
schedule shows the actual results of cumulatively applying the annualized
rates at varying asset levels. For example the effective annual fee
rate at $ __ billion of group net assets - their approximate level
for March 199 4 - was ___ %, which is the weighted average of
the respective fee rates for each level of group net assets up to that
level.
<TABLE>
<CAPTION>
<S> <C>
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Average Group Group Effective Annual
Group Annualized Net Assets Fee Rates
Assets Rate
0 - $3 billion .520% $ 0.5 billion .5200%
3 - 6 .490 25 .4238
6 - 9 .460 50 .3823
9 - 12 .430 75 .3626
12 - 15 .400 100 .3512
15 - 18 .385 125 .3430
18 - 21 .370 150 .3371
21 - 24 .360 175 .3325
24 - 30 .350 200 .3284
30 - 36 .345 225 .3253
36 - 42 .340 250 .3223
42 - 48 .335 275 .3198
48 - 66 .325 300 .3175
66 - 84 .320 325 .3153
84 - 102 .315 350 .3133
102 - 138 .310
138 - 174 .305
174 - 228 .300
228 - 282 .295
282 - 336 .290
Over 336 . 285
</TABLE>
The individual fund fee rate is .30%. Based on the average net assets of
funds advised by FMR for March 199 4 the annual basic fee rate would
be calculated as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Group Fee Rate Individual Fund Fee Rate Basic Fee Rate
</TABLE>
___% + .30 % = ___%
One twelfth (1/12) of this annual basic fee rate is then applied to the
fund's net assets averaged for the current month, giving a dollar amount,
which is the fee for that month.
The schedule shown above was voluntarily adopted by FMR on November 1,
1993 and approved by shareholders on March 23, 1994. With the
exception of changing the group fee rate schedule, the terms of the current
contract are identical to those of the prior contract.
FMR adopted the revised group fee rate schedule in part in accordance with
the settlement reached in the Labaton v. Fidelity Management &
Research, et al (Civ. Action No. 82-270-MA) litigation, brought against the
fund on February 1, 1984 and approved by the United States District Court
for the District of Massachusetts on April 7, 1986. Under the terms of the
settlement, FMR agreed to reduce its management fee, pending shareholder
approval, through a revision of its group fee rate schedule as described
above. The terms of the settlement also required that FMR will not seek an
increase in fee rates paid by the fund to FMR for a period of five years.
COMPUTING THE PERFORMANCE ADJUSTMENT. The basic fee is subject to upward
or downward adjustment, depending upon whether, and to what extent, the
fund's investment performance for the performance period exceeds, or is
exceeded by, the record of the S&P 500 over the same period. The
performance period consists of the most recent month plus the previous 35
months. Each percentage point of difference (up to a maximum difference of
+ 10) is multiplied by a performance adjustment rate of .02%. Thus, the
maximum annualized adjustment rate is + .20%. This performance comparison
is made at the end of each month. One twelfth of this rate is then applied
to the fund's average net assets for the entire performance period, giving
a dollar amount which is added to (or subtracted from) the basic fee.
The fund's performance is calculated based on change in net asset value.
For purposes of calculating the performance adjustment, any dividends or
capital gain distributions paid by the fund are treated as if reinvested in
fund shares at the net asset value as of the record date for payment. The
record of the S&P 500 is based on change in value and is adjusted for
any cash distributions from the companies whose securities compose the
S&P 500.
Because the adjustment to the basic fee is based on the fund's performance
compared to the investment record of the S&P 500, the controlling
factor is not whether the fund's performance is up or down per se, but
whether it is up or down more or less than the record of the S&P 500.
Moreover, the comparative investment performance of the fund is based
solely on the relevant performance period without regard to the cumulative
performance over a longer or shorter period of time.
During the fiscal years ended March 31, 1994, 1993, and 1992, FMR received
$______, $161,242,950, and $135,671,227, respectively, for its
services as investment adviser to the fund. These fees, which include both
the basic fee and the performance adjustment, were equivalent to__%, .75%,
and .78%, respectively, of the average net assets of the fund for each of
those years. For fiscal 1994, 1993, and 1992, the upward
performance adjustments amounted to $___________, $24,964,876,
and $24,853,118, respectively.
To comply with the California Code of Regulations, FMR will reimburse the
fund if and to the extent that the fund's aggregate annual operating
expenses exceed specified percentages of its average net assets. The
applicable percentages are 2 1/2% of the first $30 million, 2% of the next
$70 million, and 1 1/2% of average net assets in excess of $100 million.
When calculating the fund's expenses for purposes of this regulation, the
fund may exclude interest, taxes, brokerage commissions, and extraordinary
expenses, as well as a portion of its custodian fees attributable to
investments in foreign securities.
SUB-ADVISERS. On April 1, 1994, FMR entered i nto sub-advisory
agreements with FMR U.K. and FMR Far East, pursuant to which FMR U.K. and
FMR Far East supply FMR with investment research and recommendations
concerning foreign securities for the benefit of the fund. The
sub-advisory agreements provide that FMR will pay fees to FMR U.K. and FMR
Far East equal to 110% and 105%, respectively, of FMR U.K.'s and FMR Far
East's costs incurred in connection with each agreement, said costs to be
determined in relation to the assets of the fund that benefit from the
services of the sub-advisers. The fees paid to FMR U.K. and FMR Far East
under the subadvisory agreements for fiscal 1994, 1993, and
1992, are shown in the table below.
Fees Paid to Fees Paid to
Fiscal Year FMR U.K. FMR Far East
1994
1993 $224,843 $237,864
1992 434,709 466,930
CONTRACTS WITH COMPANIES AFFILIATED WITH FMR
FSC is transfer, dividend disbursing, and shareholders' servicing agent for
the fund. Under the current contract with FSC, the fund pays an annual fee
of $25.50 per basic retail account with a balance of $5,000 or more, $15.00
per basic retail account with a balance of less than $5,000, and a
supplemental activity charge of $5.61 for monetary transactions. These
fees and charges are subject to annual cost escalation based on postal rate
changes and changes in wage and price levels as measured by the National
Consumer Price Index for Urban Areas. With respect to institutional client
master accounts, the fund pays FSC a per account fee of $95.00 and monetary
transaction charges of $20.00 and $17.50, depending on the nature of
services provided. With respect to certain broker-dealer master accounts,
the fund pays FSC a per-account fee of $30, and a charge of $6 for monetary
transactions. Fees for certain institutional retirement plan accounts are
based on the net assets of all such accounts in the fund.
Under the current contract, FSC pays out-of-pocket expenses associated with
providing transfer agent services. In addition, FSC bears the expense of
typesetting, printing, and mailing prospectuses, statements of additional
information, and all other reports, notices, and statements to
shareholders, with the exception of proxy statements.
Transfer agent fees, including reimbursement for out-of-pocket expenses,
paid to FSC for the fiscal years ended March 31, 1994, 1993, and
1992 were $________, $49,705,683, and $41,482,323,
respectively.
The fund's contract with FSC also provides that FSC will perform the
calculations necessary to determine the fund's net asset value per share
and dividends, and maintain the fund's accounting records. Prior to July
1, 1991, the annual fee for these pricing and bookkeeping services was
based on two schedules, one pertaining to the fund's average net assets,
and one pertaining to the type and number of transactions the fund made.
The fee rates in effect as of July 1, 1991 are based on the fund's average
net assets, specifically, .06% for the first $500 million of average net
assets and .03% for average net assets in excess of $500 million. The fee
is limited to a minimum of $45,000 and a maximum of $750,000 per year.
Pricing and bookkeeping fees, includin g related
out-of-pocket expenses, paid to FSC for fiscal 1994, 1993, and
1992, were $________, $846,447, and $884, 596,
respectively.
From October 31, 1989 to October 18, 1991, Fidelity Management Trust
Company (FMTC) served as custodian of the fund's assets. FMTC, an
affiliate of FMR, was organized as a Massachusetts trust company in 1981.
FMTC took no part in determining the investment policies of the fund or in
deciding which securities were purchased or sold by the fund. Effective
October 19, 1991, Brown Brothers Harriman & Co. was appointed custodian
of the fund's assets. Custodian fees paid to FMTC for the period April 1,
1991 to October 18, 1991 and fiscal 1991, were $618,481 and $1,580,869,
respectively, for its services as custodian to fund.
The fund has a distribution agreement with FDC, a Massachusetts corporation
organized on July 18, 1960. FDC is a broker-dealer registered under the
Securities Exchange Act of 1934 and is a member of the National Association
of Securities Dealers, Inc. The distribution agreement calls for FDC to
use all reasonable efforts, consistent with its other business, to secure
purchasers for shares of the fund, which are continuously offered.
Promotional and administrative expenses in connection with the offer and
sale of shares are paid by FDC. Sales charge revenue paid to FDC for
fiscal 1994, 1993, and 1992, amounted to $_______,
$28,821,876, and $38,609,038, respectively.
DESCRIPTION OF THE FUND
FUND ORGANIZATION. Fidelity Magellan Fund is an open-end management
investment company originally organized as a Massachusetts corporation on
December 31, 1962. On June 19, 1981, Salem Fund, Inc. was merged with the
fund, at which time the fund's name was changed from Magellan Fund, Inc. to
Fidelity Magellan Fund, Inc. On October 1, 1984 the fund was reorganized
as a Massachusetts business trust, at which time its name was changed to
Fidelity Magellan Fund.
In the event that FMR ceases to be the investment adviser to the fund, the
right of the fund to use the identifying name "Fidelity" may be withdrawn.
The fund's Declaration of Trust permits the Trustees to create additional
funds.
SHAREHOLDER AND TRUSTEE LIABILITY. The fund is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts
law, shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of
Trust provides that the fund shall not have any claim against shareholders
except for the payment of the purchase price of shares and requires that
each agreement, obligation, or instrument entered into or executed by the
fund or the Trustees shall include a provision limiting the obligations
created thereby to the fund and its assets. The Declaration of Trust
provides for indemnification out of the fund's property of any shareholder
held personally liable for the obligations of the fund. The Declaration of
Trust also provides that the fund shall, upon request, assume the defense
of any claim made against any shareholder for any act or obligation of the
fund and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the fund itself would be unable to meet its
obligations. FMR believes that, in view of the above, the risk of personal
liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office.
VOTING RIGHTS. The fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each dollar value
of net asset value per share you own. The shares have no preemptive or
conversion rights; the voting and dividend rights, the right of redemption,
and the privilege of exchange are described in the Prospectus. Shares are
fully paid and nonassessable, except as set forth under the heading
"Shareholder and Trustee Liability" above. Shareholders representing 10%
or more of the fund may, as set forth in the Declaration of Trust, call
meetings of the fund for any purpose, including the purpose of voting on
removal of one or more Trustees. The fund may be terminated upon the sale
of its assets to another open-end management investment company, or upon
liquidation and distribution of its assets, if approved by the vote of the
holders of a majority of the fund , as determined by the current value
of each shareholder's investment in the fund . If not so terminated,
the fund will continue indefinitely . The fund may invest all its assets
in another investment company.
CUSTODIAN. Brown Brothers Harriman & Co., 40 Water Street, Boston,
Massachusetts, is custodian of the assets of the fund. The custodian is
responsible for the safekeeping of the fund's assets and the appointment of
subcustodian banks and clearing agencies. The custodian takes no part in
determining the investment policies of the fund or in deciding which
securities are purchased or sold by the fund. The fund may, however,
invest in obligations of the custodian and may purchase securities from or
sell securities to the custodian.
FMR, its officers and directors, its affiliated companies, and the fund's
Trustees may from time to time have transactions with various banks,
including banks serving as custodians for certain of the funds advised by
FMR. The Boston branch of the fund's custodian leases its office space
from an affiliate of FMR at a lease payment which, when entered into, was
consistent with prevailing market rates. Transactions that have occurred
to date include mortgages and personal and general business loans. In the
judgment of FMR, the terms and conditions of those transactions were not
influenced by existing or potential custodial or other fund relationships.
AUDITOR. Coopers & Lybrand, One Post Office Square, Boston,
Massachusetts, serves as the fund's independent accountant. The auditor
examines financial statements for the fund and provides other audit, tax,
and related services.
FINANCIAL STATEMENTS
The fund's Annual Report for the fiscal year ended March 31, 199 4 is
a separate report supplied with this Statement of Additional Information
and is incorporated herein by reference.
APPENDIX
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND
RATINGS :
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
A - Bonds rated A possess many favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the
future.
BAA - Bonds rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any long period of time may be small.
CAA - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
CA - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked
short-comings.
C - Bonds rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S CORPORATE BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal
is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rate BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal.
CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed but
debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes
that such payments will be made during such grace period. The D rating
will also be used upon the filing of a bankruptcy petition if debt service
payments are jeopardized.
The ratings from AA to CCC may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Not Applicable
(b) Exhibits
1. (a) Declaration of Trust of Registrant, dated June 25, 1984, is
incorporated herein by reference to Exhibit 1 to Post-Effective Amendment
No. 15.
(b) Supplement to the Declaration of Trust, dated December 14, 1984, is
incorporated herein by reference to Exhibit 1(a) to Post-Effective
Amendment No. 31.
(c) Supplement to the Declaration of Trust, dated April 1, 1987, is
incorporated herein by reference to Exhibit 1(b) to Post-Effective
Amendment No. 22.
(d) Supplement to Declaration of Trust, dated November 14, 1989, is
incorporated herein by reference to Exhibit 1(c) to Post-Effective
Amendment No. 29.
2. (a) By-laws of Registrant are incorporated herein by reference to
Exhibit 2 to Post-Effective Amendment No. 15.
(b) Supplement to Bylaws of Registrant, dated November 14, 1989, is
incorporated herein by reference to Exhibit 2(a) to Post-Effective
Amendment No. 29.
3. Not applicable.
4. Not applicable.
5. (a) Management Contract between Fidelity Magellan Fund and Fidelity
Management & Research Company, dated November 1, 1989, is incorporated
herein by reference to Exhibit 5(b) to Post-Effective Amendment No. 29.
(b) Sub-Advisory Agreement between Fidelity Management & Research
(Far East) Inc. and Fidelity Management & Research Company, dated
November 1, 1989, is incorporated herein by reference to Exhibit 5(c) to
Post-Effective Amendment No. 29.
(c) Sub-Advisory Agreement between Fidelity Management & Research
(U.K.) Inc. and Fidelity Management & Research Company, dated November
1, 1989, is incorporated herein by reference to Exhibit 5(d) to
Post-Effective Amendment No. 29.
. (d) Form of Management Contract between Fidelity Magellan Fund and
Fidelity Management & Research Company, dated April 1, 1994, is filed
herein as exhibit 5(d).
(e) Form of Sub-Advisory Agreement between Fidelity Management &
Research (Far East) Inc. and Fidelity Management & Research Company,
dated April 1, 1994, is filed herein as exhibit 5(e).
(f) Form of Sub-Advisory Agreement between Fidelity Management &
Research (U.K.) Inc. and Fidelity Management & Research Company, dated
April 1, 1994, is filed herein as exhibit 5(f).
6. (a) General Distribution Agreement between Fidelity Magellan Fund and
Fidelity Distributors Corporation as amended in its entirety, dated April
1, 1987, is incorporated by reference to Exhibit 6(a) to Post-Effective
Amendment No. 23.
(b) Amendment to Distribution Agreement between Fidelity Magellan Fund
and Fidelity Distributors Corporation, dated January 1, 1988, is
incorporated herein by reference to Exhibit 6(b) to Post-Effective
Amendment No. 26.
7. Retirement Plan for Non-Interested Trustees, Directors or General
Partners, effective November 1, 1989, is incorporated herein by reference
to Exhibit 7 to Post-Effective Amendment No. 34.
8. (a) Custodian Agreement, dated July 18, 1991, between Registrant and
Brown Brothers Harriman & Co. is incorporated herein by reference to
Exhibit 8(a) to Post-Effective Amendment No. 34.
(b) Appendix B, dated December 12, 1991, to the Custodian Agreement
between Registrant and Brown Brothers Harriman & Co. is incorporated
herein by reference to Exhibit 8(b) to Post-Effective Amendment No. 34.
9. (a) Amended Service Agreement between FMR Corp., Fidelity Service Co.,
and Registrant, dated June 1, 1989, is incorporated herein by reference to
Exhibit 9(a) to Post-Effective Amendment No. 30.
(b) Schedule A (transfer agent, dividend and distribution dispursing
agent, and shareholder servicing agent) to the Amended Agreement, with
respect to Fidelity Magellan Fund, dated June 1, 1989, is incorporated
herein by reference to Exhibit 9(b) to Post-Effective Amendment No. 30.
(c) Schedule B (agent to perform portfolio pricing and bookkeeping) to
the Amended Agreement, with respect to Fidelity Magellan Fund, dated June
1, 1989, is incorporated herein by reference to Exhibit 9(c) to
Post-Effective Amendment No. 30.
(d) Schedule C (agent for securities lending transactions) to the Amended
Agreement, with respect to Fidelity Magellan Fund, dated June 1, 1989, is
incorporated herein by reference to Post-Effective Amendment No. 30.
10. Not applicable.
11. Not applicable.
12. Not applicable.
13. Not applicable.
14. (a) Individual Retirement Account Custodial Agreement, and Disclosure
Statement, as currently in effect, are incorporated herein by reference to
Exhibit 14(a) to Post-Effective Amendment No. 31.
(b) Fidelity Defined Contribution Retirement Plan and Trust Agreement, as
currently in effect, are incorporated herein by reference to Exhibit 14(b)
to Post-Effective Amendment No. 31.
(c) Defined Benefit Pension Plan and Trust, as currently in effect, are
incorporated herein by reference to Exhibit 14(c) to Post-Effective
Amendment No. 31.
(d) Fidelity Investments Custodial Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(d) to Post-Effective
Amendment No. 34.
(e) Group IRA, the Custodial Agreement and Disclosure Statement, as
currently in effect, are incorporated herein by reference to Exhibit 14(e)
to Post-Effective Amendment No. 31.
(f) Fidelity Master Plan for Savings and Investments, as currently in
effect, is incorporated herein by reference to Exhibit 14(f) to
Post-Effective Amendment No. 34.
(g) Fidelity Investment 401(a) Prototype Plan for Tax-Exempt Employers,
Basic Plan Document No. 3, as currently in effect, are incorporated herein
by reference to Exhibit 14(g) to Post-Effective Amendment No. 31.
(h) 403(b)(7) Custodial Account Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(h) to Post-Effective
Amendment No. 31.
15. Not applicable.
16. (a) A schedule for computation of performance quotations is
incorporated by reference to Exhibit 16 to Post-Effective Amendment No. 24.
(b) A schedule for computation of performance calculations on behalf of
Fidelity Magellan Fund was filed as Exhibit 16(b) to Post-Effective
Amendment No. 37.
Item 25. Persons Controlled by or Under Common Control With Registrant
The Board of Directors of Registrant is the same as the boards of other
funds advised by FMR, each of which has Fidelity Management & Research
Company as its investment adviser. In addition, the officers of these
funds are substantially identical. Nonetheless, Registrant takes the
position that it is not under common control with these other funds since
the power residing in the respective boards and officers arises as the
result of an official position with the respective funds.
Item 26. Number of Holders of Securities
January 31, 1994
Title of Class Number of Record Holders
Shares of Beneficial Interest 2,654,923
Item 27. Indemnification
Article XI, Section 2 of the Declaration of Trust sets forth the
reasonable and fair means for determining whether indemnification shall be
provided to any past or present Trustee or officer. It states that the
Registrant shall indemnify any present or past Trustee, or officer to the
fullest extent permitted by law against liability and all expenses
reasonably incurred by him in connection with any claim, action suit or
proceeding in which he is involved by virtue of his service as a trustee,
an officer, or both. Additionally, amounts paid or incurred in settlement
of such matters are covered by this indemnification. Indemnification will
not be provided in certain circumstances, however. These include instances
of willful misfeasance, bad faith, gross negligence, and reckless disregard
of the duties involved in the conduct of the particular office involved.
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY
FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held, during the
past two fiscal years, the following positions of a substantial nature.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman of the Executive Committee of FMR; President
and Chief Executive Officer of FMR Corp.; Chairman of
the Board and a Director of FMR, FMR Corp., FMR Texas
Inc., Fidelity Management & Research (U.K.) Inc. and
Fidelity Management & Research (Far East) Inc.;
President and Trustee of funds advised by FMR;
J. Gary Burkhead President of FMR; Managing Director of FMR Corp.;
President and a Director of FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc. and Fidelity
Management & Research (Far East) Inc.; Senior Vice
President and Trustee of funds advised by FMR.
Peter S. Lynch Vice Chairman of FMR (1992).
David Breazzano Vice President of FMR (1993) and of a fund advised by
FMR.
Stephan Campbell Vice President of FMR (1993).
Rufus C. Cushman, Jr. Vice President of FMR and of funds advised by FMR;
Corporate Preferred Group Leader.
Will Danoff Vice President of FMR (1993) and of a fund advised by
FMR.
Scott DeSano Vice President of FMR (1993).
Penelope Dobkin Vice President of FMR and of a fund advised by FMR.
Larry Domash Vice President of FMR (1993).
George Domolky Vice President of FMR (1993) and of a fund advised by
FMR.
Charles F. Dornbush Senior Vice President of FMR; Chief Financial Officer of
the Fidelity funds; Treasurer of FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
Robert K. Duby Vice President of FMR.
Margaret L. Eagle Vice President of FMR and of a fund advised by FMR.
Kathryn L. Eklund Vice President of FMR.
Richard B. Fentin Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Daniel R. Frank Vice President of FMR and of funds advised by FMR.
Gary L. French Vice President of FMR and Treasurer of the funds advised
by FMR. Prior to assuming the position as Treasurer he
was Senior Vice President, Fund Accounting - Fidelity
Accounting & Custody Services Co.
Michael S. Gray Vice President of FMR and of funds advised by FMR.
Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.
William J. Hayes Senior Vice President of FMR; Income/Growth Group
Leader and International Group Leader.
Robert Haber Vice President of FMR and of funds advised by FMR.
Daniel Harmetz Vice President of FMR and of a fund advised by FMR.
Ellen S. Heller Vice President of FMR.
</TABLE>
John Hickling Vice President of FMR (1993) and of funds advised by
FMR.
<TABLE>
<CAPTION>
<S> <C>
Robert F. Hill Vice President of FMR; and Director of Technical
Research.
Stephan Jonas Vice President of FMR (1993).
David B. Jones Vice President of FMR (1993).
Steven Kaye Vice President of FMR (1993) and of a fund advised by
FMR.
Frank Knox Vice President of FMR (1993).
Robert A. Lawrence Senior Vice President of FMR (1993); and High Income
Group Leader.
Alan Leifer Vice President of FMR and of a fund advised by FMR.
Harris Leviton Vice President of FMR (1993) and of a fund advised by
FMR.
Bradford E. Lewis Vice President of FMR and of funds advised by FMR.
Robert H. Morrison Vice President of FMR and Director of Equity Trading.
David Murphy Vice President of FMR and of funds advised by FMR.
Jacques Perold Vice President of FMR.
Brian Posner Vice President of FMR (1993) and of a fund advised by
FMR.
Anne Punzak Vice President of FMR and of funds advised by FMR.
Richard A. Spillane Vice President of FMR and of funds advised by FMR; and
Director of Equity Research.
Robert E. Stansky Senior Vice President of FMR (1993) and of funds advised
by FMR.
Thomas Steffanci Senior Vice President of FMR (1993); and Fixed-Income
Division Head.
Gary L. Swayze Vice President of FMR and of funds advised by FMR; and
Tax-Free Fixed-Income Group Leader.
Donald Taylor Vice President of FMR (1993) and of funds advised by
FMR.
Beth F. Terrana Senior Vice President of FMR (1993) and of funds advised
by FMR.
Joel Tillinghast Vice President of FMR (1993) and of a fund advised by
FMR.
Robert Tucket Vice President of FMR (1993).
George A. Vanderheiden Senior Vice President of FMR; Vice President of funds
advised by FMR; and Growth Group Leader.
Jeffrey Vinik Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Guy E. Wickwire Vice President of FMR and of a fund advised by FMR.
Arthur S. Loring Senior Vice President (1993), Clerk and General Counsel of
FMR; Vice President, Legal of FMR Corp.; and Secretary
of funds advised by FMR.
</TABLE>
(2) FIDELITY MANAGEMENT & RESEARCH (U.K.) INC. (FMR U.K.)
FMR U.K. provides investment advisory services to Fidelity Management
& Research Company and Fidelity Management Trust Company. The
directors and officers of the Sub-Adviser have held the following positions
of a substantial nature during the past two fiscal years.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR U.K.; Chairman of the
Executive Committee of FMR; Chief Executive Officer of FMR
Corp.; Chairman of the Board and a Director of FMR, FMR
Corp., FMR Texas Inc., and Fidelity Management &
Research (Far East) Inc.; President and Trustee of funds advised
by FMR.
J. Gary Burkhead President and Director of FMR U.K.; President of FMR;
Managing Director of FMR Corp.; President and a Director of
FMR Texas Inc. and Fidelity Management & Research (Far
East) Inc.; Senior Vice President and Trustee of funds advised
by FMR.
Richard C. Habermann Senior Vice President of FMR U.K.; Senior Vice President of
Fidelity Management & Research (Far East) Inc.; Director
of Worldwide Research of FMR.
Charles F. Dornbush Treasurer of FMR U.K.; Treasurer of Fidelity Management
& Research (Far East) Inc.; Treasurer of FMR Texas Inc.,
Senior Vice President and Chief Financial Officer of the Fidelity
funds.
David Weinstein Clerk of FMR U.K.; Clerk of Fidelity Management &
Research (Far East) Inc.; Secretary of FMR Texas Inc.
</TABLE>
(3) FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC. (FMR Far East)
FMR Far East provides investment advisory services to Fidelity Management
& Research Company and Fidelity Management Trust Company. The
directors and officers of the Sub-Adviser have held the following positions
of a substantial nature during the past two fiscal years.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR Far East; Chairman of the
Executive Committee of FMR; Chief Executive Officer of
FMR Corp.; Chairman of the Board and a Director of
FMR, FMR Corp., FMR Texas Inc. and Fidelity
Management & Research (U.K.) Inc.; President and
Trustee of funds advised by FMR.
J. Gary Burkhead President and Director of FMR Far East; President of
FMR; Managing Director of FMR Corp.; President and a
Director of FMR Texas Inc. and Fidelity Management
& Research (U.K.) Inc.; Senior Vice President and
Trustee of funds advised by FMR.
Richard C. Habermann Senior Vice President of FMR Far East; Senior Vice
President of Fidelity Management & Research
(U.K.) Inc.; Director of Worldwide Research of FMR.
William R. Ebsworth Vice President of FMR Far East.
Bill Wilder Vice President of FMR Far East (1993).
Charles F. Dornbush Treasurer of FMR Far East; Treasurer of Fidelity
Management & Research (U.K.) Inc.; Treasurer of
FMR Texas Inc.; Senior Vice President and Chief
Financial Officer of the Fidelity funds.
David C. Weinstein Clerk of FMR Far East; Clerk of Fidelity Management
& Research (U.K.) Inc.; Secretary of FMR Texas
Inc.
</TABLE>
Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for most
funds advised by FMR and the following other funds:
CrestFunds, Inc.
The Victory Funds
ARK Funds
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
Edward C. Johnson 3d Director Trustee and President
Nita B. Kincaid Director None
W. Humphrey Bogart Director None
Kurt A. Lange President and Treasurer None
William L. Adair Senior Vice President None
Thomas W. Littauer Senior Vice President None
Arthur S. Loring Vice President and Clerk Secretary
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company or Fidelity
Service Co., 82 Devonshire Street, Boston, MA 02109, or the fund's
custodian Brown Brothers Harriman & Co., 40 Water Street, Boston, MA.
Item 31. Management Services
Not Applicable
Item 32. Undertakings
The Registrant on behalf of Magellan Fund undertakes, provided the
information required by Item 5A is contained in the annual report, to
furnish each person to whom a prospectus has been delivered, upon their
request and without charge, a copy of the Registrant's latest annual report
to shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 39 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Boston, and Commonwealth of Massachusetts, on the 3rd day of March 1994.
MAGELLAN FUND
By /s/Edward C. Johnson 3d(dagger)
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
(Signature) (Title) (Date)
<TABLE>
<CAPTION>
<S> <C> <C>
/s/Edward C. Johnson 3d(dagger) President and Trustee March 3, 1994
Edward C. Johnson 3d (Principal Executive Officer)
</TABLE>
/s/Gary L. French Treasurer March 3, 1994
Gary L. French
/s/J. Gary Burkhead Trustee March 3, 1994
J. Gary Burkhead
/s/Ralph F. Cox * Trustee March 3, 1994
Ralph F. Cox
/s/Richard J. Flynn * Trustee March 3, 1994
Richard J. Flynn
/s/E. Bradley Jones * Trustee March 3, 1994
E. Bradley Jones
/s/Donald J. Kirk * Trustee March 3, 1994
Donald J. Kirk
/s/Peter S. Lynch * Trustee March 3, 1994
Peter S. Lynch
/s/Edward H. Malone * Trustee March 3, 1994
Edward H. Malone
/s/Gerald C. McDonough* Trustee March 3, 1994
Gerald C. McDonough
/s/Thomas R. Williams * Trustee March 3, 1994
Thomas R. Williams
(dagger) Signatures affixed by J. Gary Burkhead pursuant to a power of
attorney dated October 20, 1993 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of attorney
dated October 20, 1993 and filed herewith.
POWER OF ATTORNEY
We, the undersigned Directors, Trustees or General Partners, as the case
may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Institutional Trust
Fidelity Advisor Series II Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Magellan Fund
Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series V Fidelity Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VII Fidelity Municipal Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Securities Fund
Fidelity Commonwealth Trust Fidelity Select Portfolios
Fidelity Congress Street Fund Fidelity Sterling Performance Portfolio, L.P.
Fidelity Contrafund Fidelity Summer Street Trust
Fidelity Corporate Trust Fidelity Trend Fund
Fidelity Court Street Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Destiny Portfolios Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Union Street Trust
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
Fidelity Income Fund
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individuals serve as Board Members (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Xupolos, each of them singly, our true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to sign
for us and in our names in the appropriate capacities, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
our names and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS our hands on this twentieth day of October, 1993.
/s/Edward C. Johnson 3d /s/Peter S. Lynch
Edward C. Johnson 3d Peter S. Lynch
/s/J. Gary Burkhead /s/Edward H. Malone
J. Gary Burkhead Edward H. Malone
/s/Richard J. Flynn /s/Gerald C. McDonough
Richard J. Flynn Gerald C. McDonough
/s/E. Bradley Jones /s/Thomas R. Williams
E. Bradley Jones Thomas R. Williams
/s/Donald J. Kirk
Donald J. Kirk
POWER OF ATTORNEY
I, the undersigned President and Director, Trustee or General Partner, as
the case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Institutional Trust
Fidelity Advisor Series II Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Magellan Fund
Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series V Fidelity Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VII Fidelity Municipal Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Securities Fund
Fidelity Commonwealth Trust Fidelity Select Portfolios
Fidelity Congress Street Fund Fidelity Sterling Performance Portfolio, L.P.
Fidelity Contrafund Fidelity Summer Street Trust
Fidelity Corporate Trust Fidelity Trend Fund
Fidelity Court Street Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Destiny Portfolios Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Union Street Trust
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
Fidelity Income Fund
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individual serves as President and Board Member (collectively, the
"Funds"), hereby severally constitute and appoint J. Gary Burkhead, my true
and lawful attorney-in-fact, with full power of substitution, and with full
power to sign for me and in my name in the appropriate capacity, all
Pre-Effective Amendments to any Registration Statements of the Funds, any
and all subsequent Post-Effective Amendments to said Registration
Statements, any Registration Statements on Form N-14, and any supplements
or other instruments in connection therewith, and generally to do all such
things in my name and behalf in connection therewith as said
attorney-in-fact deem necessary or appropriate, to comply with the
provisions of the Securities Act of 1933 and Investment Company Act of
1940, and all related requirements of the Securities and Exchange
Commission. I hereby ratify and confirm all that said attorneys-in-fact or
their substitutes may do or cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d October 20, 1993
Edward C. Johnson 3d
POWER OF ATTORNEY
I, the undersigned Director, Trustee or General Partner, as the case may
be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Magellan Fund
Fidelity Advisor Series III Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series IV Fidelity Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Select Portfolios
Fidelity Commonwealth Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Congress Street Fund Fidelity Summer Street Trust
Fidelity Contrafund Fidelity Trend Fund
Fidelity Deutsche Mark Performance Fidelity Union Street Trust
Portfolio, L.P. Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Devonshire Trust Fidelity U.S. Investments-Government Securities
Fidelity Financial Trust Fund, L.P.
Fidelity Fixed-Income Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Government Securities Fund Spartan U.S. Treasury Money Market
Fidelity Hastings Street Trust Fund
Fidelity Income Fund Variable Insurance Products Fund
Fidelity Institutional Trust Variable Insurance Products Fund II
Fidelity Investment Trust
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individual serves as a Board Member (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Xupolos, each of them singly, my true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to sign
for me and in my name in the appropriate capacity, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
my name and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Ralph F. Cox October 20, 1993
Ralph F. Cox
EXHIBIT 5(D)
FORM OF
MANAGEMENT CONTRACT
BETWEEN
FIDELITY MAGELLAN FUND
AND
FIDELITY MANAGEMENT & RESEARCH COMPANY
MODIFICATION made this 1st day of April 1994, by and between Fidelity
Magellan Fund, a Massachusetts business trust which may issue one or more
series of shares of beneficial interest (hereinafter called the "Fund"), on
behalf of its single existing series of shares of beneficial interest
(hereinafter called the "Portfolio"), and Fidelity Management &
Research Company, a Massachusetts corporation (hereinafter called the
"Adviser").
Required authorization and approval by shareholders and Trustees having
been obtained, the Fund, on behalf of the Portfolio, and the Adviser hereby
consent, pursuant to Paragraph 6 of the existing Management Contract dated
November 1, 1989, to a modification of said Contract in the manner set
forth below. The Modified Management Contract shall when executed by duly
authorized officers of the Fund and the Adviser, take effect on the later
of April 1, 1994 or the first day of the month following approval.
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the supervision
of the Fund's Board of Trustees, direct the investments of the Portfolio in
accordance with the investment objective, policies and limitations as
provided in the Portfolio's Prospectus or other governing instruments, as
amended from time to time, the Investment Company Act of 1940 and rules
thereunder, as amended from time to time (the "1940 Act"), and such other
limitations as the Portfolio may impose by notice in writing to the
Adviser. The Adviser shall also furnish for the use of the Portfolio
office space and all necessary office facilities, equipment and personnel
for servicing the investments of the Portfolio; and shall pay the salaries
and fees of all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all personnel of
the Fund or the Adviser performing services relating to research,
statistical and investment activities. The Adviser is authorized, in its
discretion and without prior consultation with the Portfolio, to buy, sell,
lend and otherwise trade in any stocks, bonds and other securities and
investment instruments on behalf of the Portfolio. The investment policies
and all other actions of the Portfolio are and shall at all times be
subject to the control and direction of the Fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for the
performance by its affiliates of) the management and administrative
services necessary for the operation of the Fund. The Adviser shall,
subject to the supervision of the Board of Trustees, perform various
services for the Portfolio, including but not limited to: (i) providing the
Portfolio with office space, equipment and facilities (which may be its
own) for maintaining its organization; (ii) on behalf of the Portfolio,
supervising relations with, and monitoring the performance of, custodians,
depositories, transfer and pricing agents, accountants, attorneys,
underwriters, brokers and dealers, insurers and other persons in any
capacity deemed to be necessary or desirable; (iii) preparing all general
shareholder communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered, maintaining
the registration and qualification of the Portfolio's shares under federal
and state law; and (vii) investigating the development of and developing
and implementing, if appropriate, management and shareholder services
designed to enhance the value or convenience of the Portfolio as an
investment vehicle.
The Adviser shall also furnish such reports, evaluations, information or
analyses to the Fund as the Fund's Board of Trustees may request from time
to time or as the Adviser may deem to be desirable. The Adviser shall make
recommendations to the Fund's Board of Trustees with respect to Fund
policies, and shall carry out such policies as are adopted by the Trustees.
The Adviser shall, subject to review by the Board of Trustees, furnish such
other services as the Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Contract.
(c) The Adviser shall place all orders for the purchase and sale of
portfolio securities for the Portfolio's account with brokers or dealers
selected by the Adviser which may include brokers or dealers affiliated
with the Adviser. The Adviser shall use its best efforts to seek to
execute portfolio transactions at prices which are advantageous to the
Portfolio and at commission rates which are reasonable in relation to the
benefits received. In selecting brokers or dealers qualified to execute a
particular transaction, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the Portfolio and/or the
other accounts over which the Adviser or its affiliates exercise investment
discretion. The Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer. This determination
may be viewed in terms of either that particular transaction or the overall
responsibilities which the Adviser and its affiliates have with respect to
accounts over which they exercise investment discretion. The Trustees of
the Fund shall periodically review the commissions paid by the Portfolio to
determine if the commissions paid over representative periods of time were
reasonable in relation to the benefits to the Portfolio.
The Adviser shall, in acting hereunder, be an independent contractor. The
Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of the
Fund are or may be or become interested in the Adviser as directors,
officers or otherwise and that directors, officers and stockholders of the
Adviser are or may be or become similarly interested in the Fund, and that
the Adviser may be or become interested in the Fund as a shareholder or
otherwise.
3. The Adviser will be compensated on the following basis for the services
and facilities to be furnished hereunder. The Adviser shall receive a
monthly management fee, payable monthly as soon as practicable after the
last day of each month, composed of a Basic Fee and a Performance
Adjustment. The Performance Adjustment is added to or subtracted from the
Basic Fee depending on whether the Portfolio experienced better or worse
performance than the Standard & Poor's Daily Stock Price Index of 500
Common Stocks (the "Index"). The Performance Adjustment is not cumulative.
An increased fee will result even though the performance of the Portfolio
over some period of time shorter than the performance period has been
behind that of the Index, and, conversely, a reduction in the fee will be
made for a month even though the performance of the Portfolio over some
period of time shorter than the performance period has been ahead of that
of the Index. The Basic Fee and the Performance Adjustment will be
computed as follows:
(a) Basic Fee Rate: The annual Basic Fee Rate shall be the sum of the
Group Fee Rate and the Individual Fund Fee Rate calculated to the nearest
millionth decimal place as follows:
(i) Group Fee Rate. The Group Fee Rate shall be based upon the monthly
average of the net assets of the registered investment companies having
Advisory and Service or Management Contracts with the Adviser (computed in
the manner set forth in the charter of each investment company) determined
as of the close of business on each business day throughout the month. The
Group Fee Rate shall be determined on a cumulative basis pursuant to the
following schedule:
Average Net Assets Annualized Fee Rate (for each level)
$0 - 3 billion .5200%
3 - 6 .4900
6 - 9 .4600
9 -12 .4300
12-15 .4000
15 -18 .3850
18-21 .3700
21 -24 .3600
24 -30 .3500
30 -36 .3450
36 -42 .3400
42 -48 .3350
48 -66 .3250
66 -84 .3200
84-102 .3150
102-138 .3100
138-174 .3050
174-228 .3000
228-282 .2950
282-336 .2900
Over 336 .2850
(ii) Individual Fund Fee Rate. The Individual Fund Fee Rate shall be
.30%.
(b) Basic Fee. One-twelfth of the Basic Fee Rate shall be applied to the
average of the net assets of the Portfolio (computed in the manner set
forth in the Fund's Declaration of Trust or other organizational document)
determined as of the close of business on each business day throughout the
month. The resulting dollar amount comprises the Basic Fee.
(c) Performance Adjustment Rate: The Performance Adjustment Rate is 0.02%
for each percentage point (the performance of the Portfolio and the Index
each being calculated to the nearest percentage point) that the Portfolio's
investment performance for the performance period was better or worse than
the record of the Index as then constituted. The maximum performance
adjustment rate is 0.20%.
Upward Adjustment. The performance adjustment rate will be a positive
number at the annual rate of 0.02% for each percentage point, rounded to
the nearer point (the higher point if exactly one-half a point), that the
Portfolio's investment performance over the month and the preceding 35
months (the "Performance Period") exceeds the record of the Index, as then
constituted, for the performance period,with the maximum such increase in
the fee rate being at the annual rate of 0.20%
Downward Adjustment. The performance adjustment rate will be a negative
number at the annual rate of 0.02% for each percentage point rounded to the
nearer point (the higher point if exactly one-half a point), that the
record of the Index for the performance period exceeds the investment
performance of the Portfolio, with the maximum such reduction in fee rate
being at the annual rate of 0.20%.
The Portfolio's investment performance will be measured by comparing (i)
the opening net asset value of one share of the Portfolio on the first
business day of the performance period with (ii) the closing net asset
value of one share of the Portfolio as of the last business day of such
period. In computing the investment performance of the Portfolio and the
investment record of the Index, distributions of realized capital gains,
the value of capital gains taxes per share paid or payable on undistributed
realized long-term capital gains accumulated to the end of such period and
dividends paid out of investment income on the part of the Portfolio, and
all cash distributions of the securities included in the Index, will be
treated as reinvested in accordance with Rule 205-1 or any other applicable
rules under the Investment Advisers Act of 1940, as the same from time to
time may be amended.
The computation of the performance adjustment will not be cumulative. A
positive fee rate will apply even though the performance of the Portfolio
over some period of time shorter than the performance period has been
behind that of the Index, and conversely, a negative fee rate will apply
for a month even though the performance of the Portfolio over some period
of time shorter than the performance period has been ahead of that of the
Index.
(d) Performance Adjustment. One-twelfth of the annual Performance
Adjustment Rate will be applied to the average of the net assets of the
Portfolio (computed in the manner set forth in the Fund's Declaration of
Trust or other organizational document) determined as of the close of
business on each business day throughout the month and the performance
period.
(e) In case of termination of this Contract during any month, the fee for
that month shall be reduced proportionately on the basis of the number of
business days during which it is in effect for that month. The Basic Fee
Rate will be computed on the basis of and applied to net assets averaged
over that month ending on the last business day on which this Contract is
in effect. The amount of this Performance Adjustment to the Basic Fee will
be computed on the basis of and applied to net assets averaged over the
36-month period ending on the last business day on which this Contract is
in effect provided that if this Contract has been in effect less than 36
months, the computation will be made on the basis of the period of time
during which it has been in effect.
4. It is understood that the Portfolio will pay all its expenses other
than those expressly stated to be payable by the Adviser hereunder, which
expenses payable by the Portfolio shall include, without limitation, (i)
interest and taxes; (ii) brokerage commissions and other costs in
connection with the purchase or sale of securities and other investment
instruments; (iii) fees and expenses of the Fund's Trustees other than
those who are "interested persons" of the Fund or the Adviser; (iv) legal
and audit expenses; (v) custodian, registrar and transfer agent fees and
expenses; (vi) fees and expenses related to the registration and
qualification of the Fund and the Portfolio's shares for distribution under
state and federal securities laws; (vii) expenses of printing and mailing
reports and notices and proxy material to shareholders of the Portfolio;
(viii) all other expenses incidental to holding meetings of the Portfolio's
shareholders, including proxy solicitations therefor; (ix) a pro rata
share, based on relative net assets of the Portfolio and other registered
investment companies having Advisory and Service or Management Contracts
with the Adviser, of 50% of insurance premiums for fidelity and other
coverage; (x) its proportionate share of association membership dues; (xi)
expenses of typesetting for printing Prospectuses and Statements of
Additional Information and supplements thereto; (xii) expenses of printing
and mailing Prospectuses and Statements of Additional Information and
supplements thereto sent to existing shareholders; and (xiii) such
non-recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Portfolio is a party
and the legal obligation which the Portfolio may have to indemnify the
Fund's Trustees and officers with respect thereto.
5. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and engage
in other activities, provided, however, that such other services and
activities do not, during the term of this Contract, interfere, in a
material manner, with the Adviser's ability to meet all of its obligations
with respect to rendering services to the Portfolio hereunder. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Adviser,
the Adviser shall not be subject to liability to the Portfolio or to any
shareholder of the Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Contract shall continue in force until July 31, 1994
and indefinitely thereafter, but only so long as the continuance after such
date shall be specifically approved at least annually by vote of the
Trustees of the Fund or by vote of a majority of the outstanding voting
securities of the Portfolio.
(b) This Contract may be modified by mutual consent, such consent on the
part of the Fund to be authorized by vote of a majority of the outstanding
voting securities of the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 6, the terms of any continuance or modification of this Contract
must have been approved by the vote of a majority of those Trustees of the
Fund who are not parties to the Contract or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval.
(d) Either party hereto may, at any time on sixty (60) days' prior written
notice to the other, terminate this Contract, without payment of any
penalty, by action of its Trustees or Board of Directors, as the case may
be, or with respect to the Portfolio by vote of a majority of the
outstanding voting securities of the Portfolio. This Contract shall
terminate automatically in the event of its assignment.
7. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Fund's Declaration of Trust or
other organizational document and agrees that the obligations assumed by
the Fund pursuant to this Contract shall be limited in all cases to the
Portfolio and its assets, and the Adviser shall not seek satisfaction of
any such obligation from the shareholders or any shareholder of the
Portfolio or any other Portfolios of the Fund. In addition, the Adviser
shall not seek satisfaction of any such obligations from the Trustees or
any individual Trustee. The Adviser understands that the rights and
obligations of any Portfolio under the Declaration of Trust or other
organizational document are separate and distinct from those of any and all
other Portfolios.
8. This Agreement shall be governed by, and construed in accordance with,
the laws of the Commonwealth of Massachusetts, without giving effect to the
choice of laws provisions thereof.
IN WITNESS WHEREOF the parties have caused this instrument to be signed in
their behalf by their respective officers thereunto duly authorized, and
their respective seals to be hereunto affixed, all as of the date written
above.
FIDELITY MAGELLAN FUND
BY: _______________
J. Gary Burkhead
Senior Vice President
FIDELITY MANAGEMENT & RESEARCH COMPANY
BY: _______________
J. Gary Burkhead
President
EXHIBIT 5(E)
FORM OF
SUB-ADVISORY AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH COMPANY
AND
FIDELITY MANAGEMENT & RESEARCH COMPANY (FAR EAST) INC.
AND
FIDELITY MAGELLAN FUND
AGREEMENT made this 1st day of April 1994 by Fidelity Management &
Research Company, a Massachusetts corporation with principal offices at 82
Devonshire Street, Boston, Massachusetts (hereinafter called the
"Advisor"); Fidelity Management & Research Company (Far East) Inc.
(hereinafter called the "Sub-Advisor"); and Fidelity Magellan Fund, a
Massachusetts business trust which may issue one or more series of shares
of beneficial interest (hereinafter called the "Trust or the Portfolio").
WHEREAS the Sub-Advisor and its subsidiaries and other affiliated persons
have personnel in various locations throughout the world and have been
formed in part for the purpose of researching and compiling information and
recommendations with respect to the economies of various countries,
including securities issued in and issuers located in such countries, and
providing investment advisory services in connection therewith;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Trust, the Advisor and the Sub-Advisor agree as
follows:
1. Duties: The Advisor may, in its discretion, appoint the Sub-Advisor
to perform one or more of the following services with respect to all or a
portion of the investments of the Portfolio. The services and the portion
of the investments of the Portfolio to be advised or managed by the
Sub-Advisor shall be as agreed upon from time to time by the Advisor and
the Sub-Advisor. The Sub-Advisor shall pay the salaries and fees of all
personnel of the Sub-Advisor performing services for the Portfolio relating
to research, statistical and investment activities.
(a) INVESTMENT ADVICE: If and to the extent requested by the Advisor, the
Sub-Advisor shall provide investment advice to the Portfolio and the
Advisor with respect to all or a portion of the investments of the
Portfolio, and in connection with such advice shall furnish the Portfolio
and the Advisor such factual information, research reports and investment
recommendations as the Advisor may reasonably require. Such information
may include written and oral reports and analyses.
(b) INVESTMENT MANAGEMENT: If and to the extent requested by the Advisor,
the Sub-Advisor shall, subject to the supervision of the Advisor, manage
all or a portion of the investments of the Portfolio in accordance with the
investment objective, policies and limitations provided in the Portfolio's
Prospectus or other governing instruments, as amended from time to time,
the Investment Company Act of 1940 (the "1940 Act") and rules thereunder,
as amended from time to time, and such other limitations as the Trust or
Advisor may impose with respect to the Portfolio by notice to the
Sub-Advisor. With respect to the portion of the investments of the
Portfolio under its management, the Sub-Advisor is authorized to make
investment decisions on behalf of the Portfolio with regard to any stock,
bond, other security or investment instrument, and to place orders for the
purchase and sale of such securities through such broker-dealers as the
Sub-Advisor may select. The Sub-Advisor may also be authorized, but only
to the extent such duties are delegated in writing by the Advisor, to
provide additional investment management services to the Portfolio,
including but not limited to services such as managing foreign currency
investments, purchasing and selling or writing futures and options
contracts, borrowing money, or lending securities on behalf of the
Portfolio. All investment management and any other activities of the
Sub-Advisor shall at all times be subject to the control and direction of
the Advisor and the Trust's Board of Trustees.
(c) SUBSIDIARIES AND AFFILIATES: The Sub-Advisor may perform any or all
of the services contemplated by this Agreement directly or through such of
its subsidiaries or other affiliated persons as the Sub-Advisor shall
determine; provided, however, that performance of such services through
such subsidiaries or other affiliated persons shall have been approved by
the Trust to the extent required pursuant to the 1940 Act and rules
thereunder.
2. Information to be Provided to the Trust and the Advisor: The
Sub-Advisor shall furnish such reports, evaluations, information or
analyses to the Trust and the Advisor as the Trust's Board of Trustees or
the Advisor may reasonably request from time to time, or as the Sub-Advisor
may deem to be desirable.
3. Brokerage: In connection with the services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Sub-Advisor, at its
own expense, shall place all orders for the purchase and sale of portfolio
securities for the Portfolio's account with brokers or dealers selected by
the Sub-Advisor, which may include brokers or dealers affiliated with the
Advisor or Sub-Advisor. The Sub-Advisor shall use its best efforts to seek
to execute portfolio transactions at prices which are advantageous to the
Portfolio and at commission rates which are reasonable in relation to the
benefits received. In selecting brokers or dealers qualified to execute a
particular transaction, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of l934) to the Portfolio and to any
other accounts over which the Sub-Advisor or Advisor exercise investment
discretion. The Sub-Advisor is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Sub-Advisor determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer. This determination
may be viewed in terms of either that particular transaction or the overall
responsibilities which the Sub-Advisor has with respect to accounts over
which it exercises investment discretion. The Trustees of the Trust shall
periodically review the commissions paid by the Portfolio to determine if
the commissions paid over representative periods of time were reasonable in
relation to the benefits to the Portfolio.
4. Compensation: The Advisor shall compensate the Sub-Advisor on the
following basis for the services to be furnished hereunder.
(a) INVESTMENT ADVISORY FEE: For services provided under subparagraph (a)
of paragraph 1 of this Agreement, the Advisor agrees to pay the Sub-Advisor
a monthly Sub-Advisory Fee. The Sub-Advisory Fee shall be equal to 105% of
the Sub-Advisor's costs incurred in connection with rendering the services
referred to in subparagraph (a) of paragraph 1 of this Agreement. The
Sub-Advisory Fee shall not be reduced to reflect expense reimbursements or
fee waivers by the Advisor, if any, in effect from time to time.
(b) INVESTMENT MANAGEMENT FEE: For services provided under subparagraph
(b) of paragraph 1 of this Agreement, the Advisor agrees to pay the
Sub-Advisor a monthly Investment Management Fee. The Investment Management
Fee shall be equal to: (i) 50% of the monthly management fee rate
(including performance adjustments, if any) that the Portfolio is obligated
to pay the Advisor under its Management Contract with the Advisor,
multiplied by: (ii) the fraction equal to the net assets of the Portfolio
as to which the Sub-Advisor shall have provided investment management
services divided by the net assets of the Portfolio for that month. If in
any fiscal year the aggregate expenses of the Portfolio exceed any
applicable expense limitation imposed by any state or federal securities
laws or regulations, and the Advisor waives all or a portion of its
management fee or reimburses the Portfolio for expenses to the extent
required to satisfy such limitation, the Investment Management Fee paid to
the Sub-Advisor will be reduced by 50% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Advisor reduces its fees to reflect such waivers or reimbursements and
the Advisor subsequently recovers all or any portion of such waivers and
reimbursements, then the Sub-Advisor shall be entitled to receive from the
Advisor a proportionate share of the amount recovered. To the extent that
waivers and reimbursements by the Advisor required by such limitations are
in excess of the Advisor's management fee, the Investment Management Fee
paid to the Sub-Advisor will be reduced to zero for that month, but in no
event shall the Sub-Advisor be required to reimburse the Advisor for all or
a portion of such excess reimbursements.
(c) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall have
provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph 1 for
the same portion of the investments of the Portfolio for the same period,
the fees paid to the Sub-Advisor with respect to such investments shall be
calculated exclusively under subparagraph (b) of this paragraph 4.
5. Expenses: It is understood that the Portfolio will pay all of its
expenses other than those expressly stated to be payable by the Sub-Advisor
hereunder or by the Advisor under the Management Contract with the
Portfolio, which expenses payable by the Portfolio shall include, without
limitation, (i) interest and taxes; (ii) brokerage commissions and other
costs in connection with the purchase or sale of securities and other
investment instruments; (iii) fees and expenses of the Trust's Trustees
other than those who are "interested persons" of the Trust, the Sub-Advisor
or the Advisor; (iv) legal and audit expenses; (v) custodian, registrar and
transfer agent fees and expenses; (vi) fees and expenses related to the
registration and qualification of the Trust and the Portfolio's shares for
distribution under state and federal securities laws; (vii) expenses of
printing and mailing reports and notices and proxy material to shareholders
of the Portfolio; (viii) all other expenses incidental to holding meetings
of the Portfolio's shareholders, including proxy solicitations therefore;
(ix) a pro rata share, based on relative net assets of the Portfolio and
other registered investment companies having Advisory and Service or
Management Contracts with the Advisor, of 50% of insurance premiums for
fidelity and other coverage; (x) its proportionate share of association
membership dues; (xi) expenses of typesetting for printing Prospectuses and
Statements of Additional Information and supplements thereto; (xii)
expenses of printing and mailing Prospectuses and Statements of Additional
Information and supplements thereto sent to existing shareholders; and
(xiii) such non-recurring or extraordinary expenses as may arise, including
those relating to actions, suits or proceedings to which the Portfolio is a
party and the legal obligation which the Portfolio may have to indemnify
the Trust's Trustees and officers with respect thereto.
6. Interested Persons: It is understood that Trustees, officers, and
shareholders of the Trust are or may be or become interested in the Advisor
or the Sub-Advisor as directors, officers or otherwise and that directors,
officers and stockholders of the Advisor or the Sub-Advisor are or may be
or become similarly interested in the Trust, and that the Advisor or the
Sub-Advisor may be or become interested in the Trust as a shareholder or
otherwise.
7. Services to Other Companies or Accounts: The services of the
Sub-Advisor to the Advisor are not to be deemed to be exclusive, the
Sub-Advisor being free to render services to others and engage in other
activities, provided, however, that such other services and activities do
not, during the term of this Agreement, interfere, in a material manner,
with the Sub-Advisor's ability to meet all of its obligations hereunder.
The Sub-Advisor shall for all purposes be an independent contractor and not
an agent or employee of the Advisor or the Trust.
8. Standard of Care: In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder
on the part of the Sub-Advisor, the Sub-Advisor shall not be subject to
liability to the Advisor, the Trust or to any shareholder of the Portfolio
for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security.
9. Duration and Termination of Agreement; Amendments:
(a) Subject to prior termination as provided in subparagraph (d) of this
paragraph 9, this Agreement shall continue in force until July 31, 1994
and indefinitely thereafter, but only so long as the continuance after such
period shall be specifically approved at least annually by vote of the
Trust's Board of Trustees or by vote of a majority of the outstanding
voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Advisor, the
Sub-Advisor and the Portfolio, such consent on the part of the Portfolio to
be authorized by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) In addition to the requirements of subparagraphs (a) and (b) of this
paragraph 9, the terms of any continuance or modification of this Agreement
must have been approved by the vote of a majority of those Trustees of the
Trust)) who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
(d) Either the Advisor, the Sub-Advisor or the Portfolio may, at any time
on sixty (60) days' prior written notice to the other parties, terminate
this Agreement, without payment of any penalty, by action of its Board of
Trustees or Directors, or with respect to the Portfolio by vote of a
majority of its outstanding voting securities. This Agreement shall
terminate automatically in the event of its assignment.
10. Limitation of Liability: The Sub-Advisor is hereby expressly put on
notice of the limitation of shareholder liability as set forth in the
Declaration of Trust or other organizational document of the Trust and
agrees that any obligations of the Trust or the Portfolio arising in
connection with this Agreement shall be limited in all cases to the
Portfolio and its assets, and the Sub-Advisor shall not seek satisfaction
of any such obligation from the shareholders or any shareholder of the
Portfolio. Nor shall the Sub-Advisor seek satisfaction of any such
obligation from the Trustees or any individual Trustee.
11. Governing Law: This Agreement shall be governed by, and construed
in accordance with, the laws of the Commonwealth of Massachusetts, without
giving effect to the choice of laws provisions thereof.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons,"
when used herein, shall have the respective meanings specified in the 1940
Act as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as of
the date written above.
FIDELITY MANAGEMENT & RESEARCH COMPANY (FAR EAST) INC.
BY: __________________
Charles F. Dornbush
Treasurer
FIDELITY MANAGEMENT & RESEARCH COMPANY
BY: ________________
J. Gary Burkhead
President
FIDELITY MAGELLAN FUND
BY: ________________
J. Gary Burkhead
Senior Vice President
EXHIBIT 5(F)
FORM OF
SUB-ADVISORY AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH COMPANY
AND
FIDELITY MANAGEMENT & RESEARCH COMPANY (U.K.) INC.
AND
FIDELITY MAGELLAN FUND
AGREEMENT made this 1st day of April 1994 by Fidelity Management &
Research Company, a Massachusetts corporation with principal offices at 82
Devonshire Street, Boston, Massachusetts (hereinafter called the
"Advisor"); Fidelity Management & Research Company (U.K.) Inc.
(hereinafter called the "Sub-Advisor"); and Fidelity Magellan Fund, a
Massachusetts business trust which may issue one or more series of shares
of beneficial interest (hereinafter called the "Trust or the Portfolio").
WHEREAS the Sub-Advisor and its subsidiaries and other affiliated persons
have personnel in various locations throughout the world and have been
formed in part for the purpose of researching and compiling information and
recommendations with respect to the economies of various countries,
including securities issued in and issuers located in such countries, and
providing investment advisory services in connection therewith;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Trust, the Advisor and the Sub-Advisor agree as
follows:
1. Duties: The Advisor may, in its discretion, appoint the Sub-Advisor
to perform one or more of the following services with respect to all or a
portion of the investments of the Portfolio. The services and the portion
of the investments of the Portfolio to be advised or managed by the
Sub-Advisor shall be as agreed upon from time to time by the Advisor and
the Sub-Advisor. The Sub-Advisor shall pay the salaries and fees of all
personnel of the Sub-Advisor performing services for the Portfolio relating
to research, statistical and investment activities.
(a) INVESTMENT ADVICE: If and to the extent requested by the Advisor, the
Sub-Advisor shall provide investment advice to the Portfolio and the
Advisor with respect to all or a portion of the investments of the
Portfolio, and in connection with such advice shall furnish the Portfolio
and the Advisor such factual information, research reports and investment
recommendations all as the Advisor may reasonably require. Such
information may include written and oral reports and analyses.
(b) INVESTMENT MANAGEMENT: If and to the extent requested by the Advisor,
the Sub-Advisor shall, subject to the supervision of the Advisor, manage
all or a portion of the investments of the Portfolio in accordance with the
investment objective, policies and limitations provided in the Portfolio's
Prospectus or other governing instruments, as amended from time to time,
the Investment Company Act of 1940 (the "1940 Act") and rules thereunder,
as amended from time to time, and such other limitations as the Trust or
Advisor may impose with respect to the Portfolio by notice to the
Sub-Advisor. With respect to the portion of the investments of the
Portfolio under its management, the Sub-Advisor is authorized to make
investment decisions on behalf of the Portfolio with regard to any stock,
bond, other security or investment instrument, and to place orders for the
purchase and sale of such securities through such broker-dealers as the
Sub-Advisor may select. The Sub-Advisor may also be authorized, but only
to the extent such duties are delegated in writing by the Advisor, to
provide additional investment management services to the Portfolio,
including but not limited to services such as managing foreign currency
investments, purchasing and selling or writing futures and options
contracts, borrowing money or lending securities on behalf of the
Portfolio. All investment management and any other activities of the
Sub-Advisor shall at all times be subject to the control and direction of
the Advisor and the Trust's Board of Trustees.
(c) SUBSIDIARIES AND AFFILIATES: The Sub-Advisor may perform any or all
of the services contemplated by this Agreement directly or through such of
its subsidiaries or other affiliated persons as the Sub-Advisor shall
determine; provided, however, that performance of such services through
such subsidiaries or other affiliated persons shall have been approved by
the Trust to the extent required pursuant to the 1940 Act and rules
thereunder.
2. Information to be Provided to the Trust and the Advisor: The
Sub-Advisor shall furnish such reports, evaluations, information or
analyses to the Trust and the Advisor as the Trust's Board of Trustees or
the Advisor may reasonably request from time to time, or as the Sub-Advisor
may deem to be desirable.
3. Brokerage: In connection with the services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Sub-Advisor, at its
own expense, shall place all orders for the purchase and sale of portfolio
securities for the Portfolio's account with brokers or dealers selected by
the Sub-Advisor, which may include brokers or dealers affiliated with the
Advisor or Sub-Advisor. The Sub-Advisor shall use its best efforts to seek
to execute portfolio transactions at prices which are advantageous to the
Portfolio and at commission rates which are reasonable in relation to the
benefits received. In selecting brokers or dealers qualified to execute a
particular transaction, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of l934) to the Portfolio and to any
other accounts over which the Sub-Advisor or Advisor exercise investment
discretion. The Sub-Advisor is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Sub-Advisor determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer. This determination
may be viewed in terms of either that particular transaction or the overall
responsibilities which the Sub-Advisor has with respect to accounts over
which it exercises investment discretion. The Trustees of the Trust shall
periodically review the commissions paid by the Portfolio to determine if
the commissions paid over representative periods of time were reasonable in
relation to the benefits to the Portfolio.
4. Compensation: The Advisor shall compensate the Sub-Advisor on the
following basis for the services to be furnished hereunder.
(a) INVESTMENT ADVISORY FEE: For services provided under subparagraph (a)
of paragraph 1 of this Agreement, the Advisor agrees to pay the Sub-Advisor
a monthly Sub-Advisory Fee. The Sub-Advisory Fee shall be equal to 110% of
the Sub-Advisor's costs incurred in connection with rendering the services
referred to in subparagraph (a) of paragraph 1 of this Agreement. The
Sub-Advisory Fee shall not be reduced to reflect expense reimbursements or
fee waivers by the Advisor, if any, in effect from time to time.
(b) INVESTMENT MANAGEMENT FEE: For services provided under subparagraph
(b) of paragraph 1 of this Agreement, the Advisor agrees to pay the
Sub-Advisor a monthly Investment Management Fee. The Investment Management
Fee shall be equal to: (i) 50% of the monthly management fee rate
(including performance adjustments, if any) that the Portfolio is obligated
to pay the Advisor under its Management Contract with the Advisor,
multiplied by: (ii) the fraction equal to the net assets of the Portfolio
as to which the Sub-Advisor shall have provided investment management
services divided by the net assets of the Portfolio for that month. If in
any fiscal year the aggregate expenses of the Portfolio exceed any
applicable expense limitation imposed by any state or federal securities
laws or regulations, and the Advisor waives all or a portion of its
management fee or reimburses the Portfolio for expenses to the extent
required to satisfy such limitation, the Investment Management Fee paid to
the Sub-Advisor will be reduced by 50% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Advisor reduces its fees to reflect such waivers or reimbursements and
the Advisor subsequently recovers all or any portion of such waivers or
reimbursements, then the Sub-Advisor shall be entitled to receive from the
Advisor a proportionate share of the amount recovered. To the extent that
waivers and reimbursements by the Advisor required by such limitations are
in excess of the Advisor's management fee, the Investment Management Fee
paid to the Sub-Advisor will be reduced to zero for that month, but in no
event shall the Sub-Advisor be required to reimburse the Advisor for all or
a portion of such excess reimbursements.
(c) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall have
provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph (1) for
the same portion of the investments of the Portfolio for the same period,
the fees paid to the Sub-Advisor with respect to such investments shall be
calculated exclusively under subparagraph (b) of this paragraph 4.
5. Expenses: It is understood that the Portfolio will pay all of its
expenses other than those expressly stated to be payable by the Sub-Advisor
hereunder or by the Advisor under the Management Contract with the
Portfolio, which expenses payable by the Portfolio shall include, without
limitation, (i) interest and taxes; (ii) brokerage commissions and other
costs in connection with the purchase or sale of securities and other
investment instruments; (iii) fees and expenses of the Trust's Trustees
other than those who are "interested persons" of the Trust, the Sub-Advisor
or the Advisor; (iv) legal and audit expenses; (v) custodian, registrar and
transfer agent fees and expenses; (vi) fees and expenses related to the
registration and qualification of the Trust and the Portfolio's shares for
distribution under state and federal securities laws; (vii) expenses of
printing and mailing reports and notices and proxy material to shareholders
of the Portfolio; (viii) all other expenses incidental to holding meetings
of the Portfolio's shareholders, including proxy solicitations therefore;
(ix) a pro rata share, based on relative net assets of the Portfolio and
other registered investment companies having Advisory and Service or
Management Contracts with the Advisor, of 50% of insurance premiums for
fidelity and other coverage; (x) its proportionate share of association
membership dues; (xi) expenses of typesetting for printing Prospectuses and
Statements of Additional Information and supplements thereto; (xii)
expenses of printing and mailing Prospectuses and Statements of Additional
Information and supplements thereto sent to existing shareholders; and
(xiii) such non-recurring or extraordinary expenses as may arise, including
those relating to actions, suits or proceedings to which the Portfolio is a
party and the legal obligation which the Portfolio may have to indemnify
the Trust's Trustees and officers with respect thereto.
6. Interested Persons: It is understood that Trustees, officers, and
shareholders of the Trust are or may be or become interested in the Advisor
or the Sub-Advisor as directors, officers or otherwise and that directors,
officers and stockholders of the Advisor or the Sub-Advisor are or may be
or become similarly interested in the Trust, and that the Advisor or the
Sub-Advisor may be or become interested in the Trust as a shareholder or
otherwise.
7. Services to Other Companies or Accounts: The services of the
Sub-Advisor to the Advisor are not to be deemed to be exclusive, the
Sub-Advisor being free to render services to others and engage in other
activities, provided, however, that such other services and activities do
not, during the term of this Agreement, interfere, in a material manner,
with the Sub-Advisor's ability to meet all of its obligations hereunder.
The Sub-Advisor shall for all purposes be an independent contractor and not
an agent or employee of the Advisor or the Trust.
8. Standard of Care: In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder
on the part of the Sub-Advisor, the Sub-Advisor shall not be subject to
liability to the Advisor, the Trust or to any shareholder of the Portfolio
for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security.
9. Duration and Termination of Agreement; Amendments:
(a) Subject to prior termination as provided in subparagraph (d) of this
paragraph 9, this Agreement shall continue in force until July 31, 1994 and
indefinitely thereafter, but only so long as the continuance after such
period shall be specifically approved at least annually by vote of the
Trust's Board of Trustees or by vote of a majority of the outstanding
voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Advisor, the
Sub-Advisor and the Portfolio, such consent on the part of the Portfolio to
be authorized by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) In addition to the requirements of subparagraphs (a) and (b) of this
paragraph 9, the terms of any continuance or modification of this Agreement
must have been approved by the vote of a majority of those Trustees of the
Trust who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
(d) Either the Advisor, the Sub-Advisor or the Portfolio may, at any time
on sixty (60) days' prior written notice to the other parties, terminate
this Agreement, without payment of any penalty, by action of its Board of
Trustees or Directors, or with respect to the Portfolio by vote of a
majority of its outstanding voting securities. This Agreement shall
terminate automatically in the event of its assignment.
10. Limitation of Liability: The Sub-Advisor is hereby expressly put on
notice of the limitation of shareholder liability as set forth in the
Declaration of Trust or other organizational document of the Trust and
agrees that any obligations of the Trust or the Portfolio arising in
connection with this Agreement shall be limited in all cases to the
Portfolio and its assets, and the Sub-Advisor shall not seek satisfaction
of any such obligation from the shareholders or any shareholder of the
Portfolio. Nor shall the Sub-Advisor seek satisfaction of any such
obligation from the Trustees or any individual Trustee.
11. Governing Law: This Agreement shall be governed by, and construed
in accordance with, the laws of the Commonwealth of Massachusetts, without
giving effect to the choice of laws provisions thereof.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons,"
when used herein, shall have the respective meanings specified in the 1940
Act as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as of
the date written above.
FIDELITY MANAGEMENT & RESEARCH COMPANY (U.K.) INC.
BY: __________________
Charles F. Dornbush
Treasurer
FIDELITY MANAGEMENT & RESEARCH COMPANY
BY: ________________
J. Gary Burkhead
President
FIDELITY MAGELLAN FUND
BY: ________________
J. Gary Burkhead
Senior Vice President
